Despite the challenges posed by the Covid-19 pandemic, many industries are eagerly waiting to resume activity with adjusted plans and targets for the third and fourth quarters of 2020.
Particularly for the Thai retail market and brands, significant shifts are foreseen in three areas -- landlords or developers, retailers or brands and finally, consumer behaviour -- according to the property consultancy CBRE.
The first change to watch is the relationship between retail landlords and tenants.
"Cooperation between retail landlords and tenants will become more crucial than ever before," said Jariya Thumtrongkitkul, head of advisory and transaction services (retail) with CBRE Thailand.
"Both sides will now consider more realistic rents and flexible leasing terms and conditions depending on retail business and sizes. 'Partnership rents' and percentage revenue-sharing will be preferred options rather than fixed rents.
"Even though this will make the retail market more complicated, it is the most realistic approach going forward in the new era."
In the old days, most retail tenants and landlords were familiar with fixed rental fees, where tenants did not need to disclose their transactions and monthly revenues to landlords, and landlords could easily predict their monthly revenue for the whole retail project.
But the sudden arrival of the global outbreak has exposed the drawbacks of this option to tenants, especially given business uncertainty based on uncontrollable circumstances.
For developers, changes in the use of retail space are also in the works to restore customers' confidence in safety, engagement and spending appetite. As social distancing becomes the new normal, shopping centres are likely to provide more semi-indoor-outdoor areas where customers can enjoy fresh air, various temporary spaces for pop-up stores or unique retail formats, and additional recreation areas like green space, outdoor seating, pet-friendly areas, auditorium space, rooftop space and jogging lanes, she said.
These new landmarks and other signature areas of shopping malls will flourish as additional lures to enhance customer engagement and confidence in safety, and in creating positive and unique shopping experiences.
CBRE believes hygiene and cleanliness is an essential retail design principle, including touchless technologies that reduce direct surface contact such as automatic toilets, entrance door sensors, and automated parking, all expected to be heavily relied upon as a result of social distancing.
On the retailers' side, while some brands might be forced to permanently close unprofitable branches, others will become more selective in choosing the most suitable locations and rental terms. They will expect to be offered shorter lease terms and lower security deposits in order to improve liquidity.
More importantly, businesses are strategically adjusting their operating space as they do not require as large a service area in the storefront.
Jariya Thumtrongkitkul, head of advisory and transaction services (Retail), CBRE Thailand
"We are seeing retailers, especially food and beverage, fashion, cosmetics and personal care businesses, shifting their focus heavily towards e-commerce," said Ms Jariya.
"The fastest adapters like the fast-food chains will downsize their seating areas to have bigger operating kitchens and delivery pick-up areas.
"A big casual dining restaurant, for example, will now scale down its space. Retailers' rental space requirements may be reduced by 20-40% from their original size prior to the Covid-19 pandemic."
As health and wellness concerns drive more consumers to seek indulgences online during a time of social distancing, retailers will pour the money generated from operating expense cuts -- from size reduction, rental prices and construction for each branch -- into expanding an always-on presence to equip their business for the cut-throat competition of digital platforms. Enhancing online users' positive experiences will become their main digital strategy.
"Consumers should brace themselves for a new breed of retail businesses that are already thriving off the 'Lazy Economy' consumer pattern in major cities around the world," she said.
With online shopping, at-home fitness classes, food delivery and home cinema apps such as Netflix, people will fill their households with comfort products and wellness-enhancing upgrades such as lounging furniture, gym equipment and electronics for remote working.
Consequently, both retail landlords and tenants must strive to create a positive shopping experience for these health-conscious and convenience-focused consumers.
In the long run, CBRE believes the Thai retail market will undergo a major readjustment of space for wellness purposes and relationships among all market stakeholders.
From economic downturns to political unrest, the rise of digital platforms to the environmental crisis, keeping ahead of consumer behaviour trends is vital not only for the retail industry's growth, but also for its survival.