SURVEY

Fast food retail to recover fastest from pandemic

Healthcare related retail tenants to also bounce back quicker.

In Summary
  • According to the survey 64 per cent of the restaurants are expected to recover first in the retail sector followed by healthcare related retail tenants at 14 per cent.
  • As a result of the crisis, retailers are expected to feel the brunt of the crisis more severely with 40 per cent of respondents indicating they expected their H2 2020 forecasts to be impacted by up over 75 per cent.
An empty fast food eatery in Nairobi's CBD.
An empty fast food eatery in Nairobi's CBD.
Image: CHARLENE MALWA

Fast food restaurants are expected to be the quickest to recover from the Covid-19 crisis, the Knight Frank Africa Market Pulse Survey shows.

According to the survey 64 per cent of the restaurants are expected to recover first in the retail sector followed by healthcare related retail tenants at 14 per cent.

In H2 2020 different accommodations were sought by retail tenants with 31 per cent reporting that rent holidays were requested while 31 per cent reported that a renegotiation of lease terms was requested.

 

Other accommodations sought were short term renewals as well as rental payments on a turn over basis, pointing to the increasing flexibility in lease terms required by retail tenants in times of uncertainty.

On potential retail leasing structures incorporating revenue sharing or percentage rent models, respondents’ anticipated the model becoming more common.

With the increasing disruption in supply chains as a result of lockdown measures imposed and border closures, 61 per cent of the respondents indicated that this significantly impacted their ability to fulfil demand for products leading to additional financial stress.

With the retail sector expected to be under pressure for the short to medium term, it is expected that more flexible lease terms and potential revenue sharing arrangements may be requested by retail tenants in the future as they seek to hedge themselves in the event of similar crises.

As a result of the crisis, retailers are expected to feel the brunt of the crisis more severely with 40 per cent of respondents indicating they expected their H2 2020 forecasts to be impacted by up over 75 per cent.

Majority of the respondents also anticipate that there will be a change in the retail mix, with increasing biases towards essential goods provision.

In addition to Covid-19, respondents indicated that additional factors continue to exacerbate the stress on the sector in different countries such as currency devaluations impacting ability to pay rent. 

 

These factors are expected to lead to a generally slowed down recovery of the sector post Covid.