We saw great success over August as the market began to open up, and the government’s Eat Out to Help Out scheme encouraged people back out in most locations with over 100 million meals discounted throughout the month of August. Recovery of city centres remains hampered, however, which we discuss further within our UK Retail Outlook Report.

Unlike March, we are no longer being advised to ‘Stay at Home’ and so the opportunity for retail and leisure remains. However, the rules around groups of no larger than six, as well as tougher punishments for those establishments not adhering to the new laws will have an impact on recovery.

HEADLINE UK RETAIL INSIGHTS

Footfall trends

• Footfall levels have improved dramatically since the height of the lockdown, with the all-UK average reporting a decline of -27.5% last week, on a year-on-year basis.

• Retail Parks remain the most resilient, with only a marginal fall of -10.4% in the week to 12 September, compared to the same period in 2019. Footfall recovery across high street and shopping centre locations remains slightly more subdued, reporting declines of -33.7% and -31.2% year-on-year respectively.

• In the last six weeks, much of the recovery has been led by typical domestic leisure-led holiday destinations during the peak summer holiday season. However, with many schools returning last week, footfall across each destination type suffered a week-on-week decline.

• What’s more, larger city centres continue to be adversely impacted by a much slower return to offices than initially anticipated. For example, footfall across the West End, according to New West End Company, remains down 56% down compared to the same period in 2019.

• In the F&B sector, the Eat Out to Help Out scheme has proved to be successful, with over 100m covers claimed for over the duration of the scheme, equating to £522m. OpenTable also reported positive year-on-year growth in terms of seated restaurant covers across the UK for each day the scheme was in operation, emphasising how beneficial the scheme was to the F&B sector in August.

Update of Chancellor, Rishi Sunak’s Eat Out to Help Out scheme

• As of August 14, the 'Eat Out to Help Out' scheme has reportedly been used more than 10.5 million times in its first week. The government announced a £30 billion plan to “protect, support and create” jobs. The scheme was intended to boost the hospitality sector with the government contributing 50% of a meal (a discount of up to £10 per person) consumed within a restaurant, pub or café premises Monday–Wednesday. The Treasury reported that 83,068 restaurants have signed up to the scheme.

Update on new government restrictions in England – a summary of the latest rules and guidelines;

Following the scientific address to the nation on Monday 21st September, the Prime Minister addressed parliament on Tuesday 22nd September to reveal tighter restrictions to be imposed in England:

• Hospitality businesses are now to close at 10pm and under new law only table service will now be allowed in these establishments

• Businesses must legally collect contact details of customers for track and trace and enforce social distancing and can be fined if they are not doing so

• Office workers should stay at home if they can, which reflects a change in previous advice to return to work

• Live sporting events, exhibitions and conferences due to start from 1st October have now been postponed

• Weddings are limited to a maximum of 15 people

Whilst this represents a tightening on the restrictions imposed across England, the Prime Minister has asserted that this is not a second lockdown. Schools, colleges, universities, businesses and religious establishments will remain open and they are not reverting to the Stay at Home advice previously adopted in March.

Announcements regarding the latest changes in Wales, Scotland and Northern Ireland, and reopenings across the UK

Wales

• The First Minister of Wales announced local lockdowns to include the following areas, which face extra local restrictions from 18:00 22 September 2020, with Caerphilly county borough and Rhondda Cynon Taf already in local lockdown: Newport, Bridgend, Blaenau Gwent, Merthyr Tydfil

• Mirroring the restrictions placed across the UK, the First Minister of Wales announced on 22 September the closure of pubs, cafes and restaurants in Wales at 22:00 under new measures. Sales of alcohol in supermarkets and off-licenses will also be stopped at 22:00. People have also been asked to only make 'necessary journeys'

Scotland

• From Wednesday 23 September onwards, people are being advised not to visit other households indoors. This will become law from Friday 25 September. This restriction is already in place in Glasgow, North and South Lanarkshire, East and West Dunbartonshire Renfrewshire and East Renfrewshire.

• The 'rule of six' from two households will still apply outdoors and in hospitality venues.

• Pubs, bars and restaurant must now close by 22:00 and hospitality venues must warn customers they are entering a 1m zone where 2m distancing is not possible. Face masks must also be worn while moving around hospitality venues and they are mandatory for staff.

Northern Ireland

• Lockdown restrictions were extended in Northern Ireland from 18:00 on Tuesday 22 September as a result of rapidly rising new cases. These restrictions include no mixing of households indoors, and no more than six people from two households can meet in private gardens.

• Pubs that do not serve food however were permitted to reopen in Northern Ireland on Wednesday, despite the new restrictions.

CVA & Administration announcements

• New Look – CVA approved on 15th September. The CVA was launched on 26th August, proposing up to 12% turnover rents on 402 of their units and not paying rent on 68 stores.

• Wasabi - CVA approved. It was launched on 21st August and they have proposed switching to a turnover basis for a majority of their 51 stores, limiting the number of closures. They have cited the ongoing social distancing measures as well as the slow return to London offices and reduction of tourism as the main motivation for this restructuring.

• Itsu – vote for the CVA was held on 19 August. Their proposal was looking to secure rent cuts on 53 of their 77 sites across the UK with two proposed closures.

• Pizza Express – CVA has been approved. It was launched on 18th August, confirming 73 closures and proposing rental reductions and turnover rents across the remaining sites within the portfolio. The vote is proposed for 4 September.

• Buzz Bingo – CVA was approved, which will see the closure of 26 of 117 of their clubs.
• Pizza Hut – launched a CVA on 10th September. Under the CVA they were proposing to shut 29 stores, proposing to switch remaining sites in their portfolio to turnover provisions for a period of recovery in the wake of the Covid-19 pandemic.

• Baird Group – Creditors have voted in favour of the CVA which will see the closure of 18 stores, as well as one warehouse and one office. In addition, 29 stores will see a reduction with a phased rebuild of rent.
  
  

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GLOBAL RETAIL INSIGHTS (FROM SAVILLS RETAIL AGENCY TEAM)

The latest insights from our colleagues in Europe, America and Asia show us the results of countries that have begun to open up the retail and leisure sectors with social distancing and safety restrictions in place.

U.S.A

• Over 30 states in the U.S. have now implemented the need to wear face masks when in public space where social distance regulations cannot be maintained.

• Many states are experiencing a spike in cases as they enter phased opening. States like Florida seeing 80,000+ cases for the seven days ending July 17th compared to 65,000+ cases the seven days prior, California seeing 62,000+ cases for the seven days ending July 17th compared to 60,000 cases the seven days prior.

• The U.S. is still seeing a daily increase of 60,000+ in new Covid-19 cases as they battle to keep infection down.

• Most retail is open across the U.S. with capacity limitations. Gyms, Cinemas, nightclubs, outdoor entertainment, place of worship with 25–50% limit. Some states such as Colorado have ordered bars and nightclubs to close again amid the rise of more Covid-19 cases. California has also announced statewide restrictions on July 13th to ban indoor dining and all bars, zoos and museums to close for the next three weeks after reopening on June 12th.

• Most states are still seeing an increase in Covid-19 cases.

• New York entered Phase 4 opening on 20th July though indoor dining, malls, movie theatres, gyms and museums to remain closed. Restaurants/bars across the state are barred from selling alcohol unless they are accompanied by 'food items'. They could lose their liquor licence should they be found not adhering to social distancing rules or allow customers to drink without ordering food, (three strikes and would be ordered to close). Malls are still closed and cannot open until new high-efficiency venting systems are installed, though stores and restaurants with exterior exits at malls were able to open during Phase 2 of openings.

• U.S retail sales rose 7.5% in June as shoppers returned to opened stores that had closed during April.

• YoY retail sales were down 8.1%.

• Clothing store sales grew 105.1% for the month of June, although still down 57.3% for the year.

• Furniture stores sales rose 32.5% but were still 29.7% lower than last year. Sporting goods and hobby stores sales increased by 26.5%, down 9% YoY.

• Department stores rose by 19.8%, although still down 27.7% for the year.

• Restaurants and bar sales were up 20% as many reopened inside dining with social distancing and limiting of capacity. Total sales is still 38.8% lower than last year.

Canada

• Most of Ontario entered Stage 3 of reopening on July 17, though Toronto, Peel and Windsor-Essex region had to remain in Stage 2 due to higher cases compared to the rest of the province. Toronto entered Stage 3 on Friday 31 July.

• Indoor dining can resume, except for buffet operations (size of gathering is limited to 50 people indoor and 100 outdoor patio).

• Gyms are permitted to reopen with strict measures in place.

• Attractions such as galleries, zoos, museums, movie theatres and performing arts venue are permitted to reopen with public health measures in place (max capacity numbers etc). Convention centres, live shows and playgrounds will also be allowed to reopen.

• Casinos are permitted to reopen, but table games are still banned.

• Businesses such as amusement parks, water parks nightclubs are still banned from reopening.

• Face masks are now mandatory across Ontario and Quebec and need to be worn in public indoor spaces and all public transport. (Quebec was the first province to introduce mandatory face masks. Other provinces are now looking to mandate face masks.

• Statistics Canada reported retail sales bounced back 19% in May but still 20% below where they were before Covid-19. Online shopping saw an increase of 112% from last May’s levels.

• Positive news as preliminary data suggests an even bigger rebound is expected for June, as initial figures indicate sales were up 25% of May, (that would bring sales last month to about 100% of February levels). It is too early to say if this is due to the pent up demand and the issue is whether the sharp rebound will be sustained in the coming months.

UK

• City centre locations are suffering more than suburban neighbourhood malls where people are shopping for essentials.

• Retail markets that rely upon lunchtime trade are suffering which will last until at least September when children are back at school and people start returning to offices to work.

• Landlords becoming increasingly under pressure from retailers with many putting 12-month support/turnover leases in place to get retailers through the Covid-19 period.

• More flexible terms being agreed on new leases – five years with three-year breaks.

• Less than 40% of rents were paid on the June quarter date.

• Service charges were not paid by retailers for some time during lockdown; therefore, shopping centres have been under pressure – retailers have now started to repay service charges.

• International brands are seeing the opportunity to come in at a much lower cost.

Ireland

• Visitors to Ireland, except those from a recently published and very limited 'green list' are required to quarantine for 14 days on arrival.

• Dublin city centre, whilst open for trade, is visibly quieter with the absence of tourists and many office workers.

• Similar to the UK, landlords are becoming increasingly under pressure from retailers to engage and agree support packages.

• Majority of occupiers are now seeking shorter, more flexible leases, potentially with turnover based rental payments. Strong 'Covid' clauses now a feature of negotiation.

• Ireland suffering the fallout from UK CVA and business failures – with brands withdrawing from the market and stores closing.

• We are beginning to see some re-engagement from larger tenants to fulfil their strategic requirements – but these new deals will likely be on more tenant-orientated terms.

France

• High street retail, particularly in Paris and other large cities, is suffering the most given the reduced number of office workers (most offices have 30% capacity limits) and a significant lack of tourists.

• Department stores such as Galleries Lafayette rely heavily on tourism so are significantly impacted as a result (40% of spend at their Boulevard Haussmann store comes from Chinese tourists).

• Restaurants and cinemas have reopened – both slowly picking back up

• The out-of-town retail market is performing well. The investment market has slowed, but is starting to pick back up again.

Spain

• A recent spike in infections has meant that certain regions have been forced to re-impose measures with tourists travelling from the U.K. having to quarantine for two weeks on return.

• The high street market is suffering, particularly in tourist-driven high streets – retail in urban areas that are not reliant on tourists have picked up more quickly.

• There have been a number of high street closures reported, including Inditex (300 stores in Spain alone), Follie Follie, Maypaz, Mama Framboise in recent weeks. The limited requirements that they are seeing are coming from urban supermarkets and banks.

• The shopping centre market is moving again with a number of people preferring to shop in covered malls with air-con at this time of year.

• There are a number of small Spanish brands going out of business, so landlords are expecting to see increased vacancy rates by September.

• Sectors that are doing well include athleisure (both instore and online), DIY (up 30%), homeware (exponential growth in online) and food (sales up 10-15%).

• Fashion retail is performing better online than instore, and a lot of fashion retailers are concerned about sales between now and the end of the year. Face masks are obligatory, long queues for changing rooms and payments in the larger stores are making the shopping experience uncomfortable.

• Restaurants have reopened and allowed up to 100% capacity on terraces and 70% inside, following a 1.5m distance limit. Operators are focused in expanding delivery services, increasing the range of healthy products and improving their service and experience to maintain and attract more custom.

Italy

• Similar to the above, high street retail in the likes of Milan and Rome are suffering due to lack of office workers (again, running at 30% capacity levels) and tourists. Hoping for an increase in sales and footfall from September when offices are fully operational again.

• Although restaurants are allowed to reopen, a number of F&B concepts remain closed until September so they can benefit from the increased footfall from office workers and tourists.

• Luxury retail is suffering significantly, again due to the lack of tourism.

• Shopping centres reopened with four weeks of strong growth, but have since seen a downturn in spend and footfall (-23% like-for-like sales compared to 2019).

• Neighbourhood shopping centres are doing a lot better than some of the larger regional malls.

• Out-of-town retail parks are performing well with a number of people opting to drive to them rather than use public transport to go into city centres.

• In terms of retail store closures, Bimba y Lola and Estee Lauder have both announced a number of disposals this last week.

Germany

• Still wearing masks in high street retail stores and shopping centres, as well as all public spaces.

• In some cities they’re also required to be worn when entering and exiting restaurants, but not whilst at tables.

• The upside of Covid is that the city authorities are granting wider external space for restaurants and coffee shops.

• Nightclubs are not allowed to reopen.

• A major German shopping centre landlord is reporting an average of -20% footfall.

• Very few retailers are expanding opportunistically, most are taking advantage to negotiate a prolongation.

• Leisure/entertainment facilities, gyms, saunas, swimming pools, lakes are open with limited capacity.

• Covid numbers have risen again recently, reproduction number above 1.

• Concerns about second wave is rising, but not on a major public level.

• Economic consequences expected to be seen in October/November, therefore little retail letting activity happening.

Switzerland

• Switzerland is performing well post-Covid.

• No requirement for masks to be worn in retail stores, only on public transport.

• Less footfall traffic, but a higher conversion rate in terms of spend. Very few retail vacancies which is a positive, but limited demand for retail stores.

China

• China’s economy grew by 3.2% in the second quarter of the year.

• China's retail sales of consumer goods declined 3.9 percent year on year in the second quarter. The number in Q1 was 15.8% decrease.

• Beijing went through a second wave of pandemic, but the government managed to get everything under control very quick. Gyms and leisure facilities are gradually reopening.

• We see an 80–90% recovery in footfall in shopping malls in tier one cities. Rent is still stable in prime retail areas; however, in non-prime retail areas, landlords are giving rent concession to solve the vacancy situation.

• Cinemas reopened on 20 July after a six-month closure (30% capacity). Temperature checks and mask-wearing are mandatory. Shanghai International Film Festival, which was originally taking place in June, got postponed to 25 July. 100,000 tickets were sold out in ten minutes.

• Several landlords in China have mentioned that luxury brands are doing extremely well this year.

• The Chinese government has plans to promote domestic consumption and drive healthy competition among downtown tax-free retailers. In June, Wangfujing Group, a state-owned department store operator, has been granted a government license for duty-free retail. Bailian Group and Dashang Group have confirmed that they have submitted an application for a duty-free licence but noted that there was 'uncertainty' over whether it would be granted.

Singapore

• Singapore entered into Phase 2 of the gradual reopening of the economy on 19 June.

• Retail stores and F&B establishments are allowed to open, but with strict social distancing restrictions.

• For F&B outlets, this means operating at a lower capacity and sales may not pick up to pre- Covid-19 levels for many.

• Entertainments and leisure establishments like clubs, KTVs and cinemas remain closed.

• Gyms may operate, but at limited capacity.

• Offices are allowed to open, but the government has strongly encouraged working from home.

• Retail leasing activity has picked up, especially for F&B, enrichment and entertainment (despite still being closed).

• Landlords are still resisting reducing rents, although they may eventually bow to pressure from more store closures in the coming months.

Hong Kong

• Hong Kong went through a third wave of Covid-19. More than 1,000 new infections have been reported since early July, which is more than 40 percent of the total since the virus first hit the city in late January.

• Restaurants were closed for dining in after 6 pm with only four people per table permitted before 6 pm.

• Gyms and leisure facilities were closed again.

• Footfall in prime areas fell significantly like TST, Central, CWB but those malls in suburban areas remain unchanged as most people are shopping in more local malls.

Korea

• Tourist destination such as Myeong-dong, is still empty, the footfall is around 50% as the same time last year. There are vacant units in Myeong-dong area which is very rare to see.

• The footfall of Gangnam area has recovered 70% given its target consumers are local people.

• Bars in Itaewon (famous dining and nightlife area in Seoul) started to reopen, however, the traffic remains low.

• F&B recovering faster than retail.

• The malls in prime retail areas recovering faster than malls in suburban areas.

• KTVs and cinemas are opened, but people still hesitant to go.

• Everyone required to wear masks.

Thailand

• The pandemic is under control and life is getting back to the normal in Thailand.

• F&B recovering faster than retail.

• Fashion and lifestyle brands are picking up.

• Icon Siam recovering slower than other malls as it targets tourists.

• Gyms are open with real name registration system.

• Mask-wearing is mandatory across Thailand.

Vietnam

• Vietnam only went through one-month of lockdown.

• Some brands are still actively expanding.

• F&B recovering faster than retail.

• Kid education centre, entertainment concepts are suffering in Vietnam.

• Cosmetic brands are starting to launch online stores after the pandemic.

• Vacancy rate is increasing and becoming a lot more noticeable.

Australia

• The general view in Australia is that further lockdowns are coming. Melbourne, a city of five million people went back into lockdown.

• Cafés and restaurants have restrictions in place on the number of people entering.

• Gyms are open but with strict limits on number of people.

• Theatres are still closed.

• Overall footfall nationally is down c.25% on last year for the month of July.

Malaysia

• Shopping malls have reopened. Community malls have recovered 70%, but in city centres, there’s a 50% reduction in footfall in shopping malls.

• New retail projects have been delayed.

• Cinemas started to reopen in July.

• Gyms reopened in June.

• High street shops are doing well.

UK RETAIL REPORT

Our latest UK Retail Outlook Report covers the current themes shaping the retail market, including:

• An update in terms of the consumer market and what the recovery outlook might look like.

• What the impact has been on ecommerce activity across the UK and whether it’s likely to remain at such levels.

• How retail insolvency has fared in 2020 in light of the pandemic and a look at the sectors hardest hit.

• Covid-19’s impact on retail rents and the rise of alternative lease models.

Read more here