Latest Lockdown Learnings: The Good, The Bad and The Ugly
Tenant Leasing Group’s Principal, Phil Reichelt, was recently featured in a Commercial Real Estate article about the impact of the latest Sydney COVID-19 lockdown on business tenants. Here, Phil discusses the good, the bad and the ugly of how businesses are dealing with the change and uncertainty the coronavirus pandemic has brought upon us.
Doing it tough: Phil Reichelt on lockdown losses
The NSW Government has announced a new package of grants and changes to the Dine & Discover voucher program to help small businesses amidst Sydney’s latest COVID-19 lockdown.
The series of aid measures include grants of between $5000 and $10,000 for small businesses, payroll tax deferrals for all employers, an extension of the Dine & Discover voucher program to August 31 and the ability for people to use these vouchers for takeaway delivered to their home by the venue itself.
But at the Tenant Leasing Group, Philip Reichelt said many businesses were doing it so tough that these concessions won’t be enough to help.
“I think some sectors are going to need a lot more help than this,” he said. “For CBD food and beverage retailers and businesses involved in the travel industry, it isn’t going to be enough. Many people are doing it really tough.
“More help is required – otherwise, there’s going to be lots of bloodshed.”
Hanging on: how businesses are surviving during the pandemic
It isn’t all bad news, however. We’ve all heard the buzzwords, but it’s true – many agile businesses across Australia have been pivoting and adapting to the pandemic and its consequences. The Impact of Covid-19 on Australian Business survey found that COVID-19’s impacts on how Australian businesses trade, operate and communicate were, to a large extent, for the better. 35% of businesses brought forward e-Commerce integration due to trading restrictions, and 39% said they planned to diversify supply chains in the next six to 12 months.
GPT Group’s head of retail Chris Barnett says that it is omni-channel, experiential and data-driven businesses which have done particularly well amidst fluctuations in shopping activity during COVID-19. “We need to create destinations that really enrich people’s experiences, not only just to come and shop for necessities, daily needs and food,” he said. “Shopping centres, they now need to evolve into places where people live, people work, people exercise, people dine, a holistic offer.”
So while CBD hospitality outlets struggled, decentralisation and localisation reinvigorated the suburbs and the regions, bolstering local businesses. And according to Infrastructure Australia, these trends are likely here to stay.
A new hope: innovation in the post-COVID world
Australian skincare brand Aesop closed its retail stores after the pandemic hit, moving all business online and adding four additional warehouse sites. Fashion giant Gap is doing the same, going online-only in the UK. Meal delivery service HelloFresh has announced plans to open a third Australian distribution centre in Victoria and potentially a Queensland centre as part of their long-term growth strategy. Woolworths has just begun construction on its $1.2 billion Moorebank distribution hub, while also announcing plans for a new liquor distribution centre in Wetherill Park in Sydney’s south-west.
See the trend? Warehouses were hot property before COVID, but they’re even hotter now. As the pandemic accelerates e-Commerce adoption, competitive supply chain and warehousing solutions are more valuable than ever. In the first three months of 2021, demand for industrial space was up 83% on the same period last year, according to data from Commercial Real Estate.
Mirvac’s head of industrial, Richard Seddon, explains: “What’s been interesting from an industrial perspective is e-commerce is an incremental driver of additional floor space demand. That’s because typically inventory that was held in the store is actually now held in the warehouse.
“We’re also seeing that the supply chain is a key source of competitive advantage for operators in the e-commerce space with costs, speed, and reliability, all paramount to derive a better proposition for consumers,” Mr Seddon said.
With transport costs about 40 to 50 per cent of an occupier’s cost base, that means that “selecting the right location becomes more and more important for those businesses as they set themselves up for delivering a better proposition to the consumer”.
Businesses use their supply chains as a competitive source of differentiation. “And so we’re seeing very much a lot of competition in that space between businesses and a lot of investment to procure the best solutions to provide that underlying support for supply chain solutions,” Mr Seddon said.
Sourcing smarter shops and sheds: How Tenant Leasing Group can help
As one of Australia’s leading tenant representation services with over 50 years of commercial property experience, Tenant Leasing Group is uniquely positioned to help businesses take advantage of real estate opportunities in 2021 and beyond. For example, we are the national tenant representative for Brosa, a $20m disruptor brand in the furniture and homewares space backed by the VC partners behind Canva. Our knowledge and connections within warehouse-district markets and across showroom real estate meant we could secure cost-effective sites which match Brosa’s ambitions.
Tenant Leasing Group works with retail, large format retail and industrial & logistics clients on their warehousing and other property requirements. From renegotiating existing leases to finding new space, downsizing, relocation, rationalisation, fit-outs, strategic advisory and more – we’re here to support commercial occupiers minimise costs and make sure their lease arrangements work for their bottom line. Get in touch today!
Article by Phil Reichelt – Principal, Tenant Leasing Group
Principal, Tenant Leasing Group
Phil has 25+ years experience advising and representing tenants on retail, industrial, large format retail, and other commercial property leasing.
A trusted veteran, Phil knows how to work negotiations in the tenant’s favour. He builds relationships directly with founders, business owners and senior executives to help optimise their business property situation.