Assetsoft - Blog #Retail

How Retail Real Estate is Recovering from the Pandemic

Wed, 03 Aug 2022 08:32:00 -0500

More business and new transformed consumer behaviors were major trendsetters for the retail shopping industry. As a ripple effect, the retail real estate industry also changed and suffered quite a setback during the two years of the pandemic.

Managing such retail real estate businesses became even more challenging given the low revenue in this industry for the past two years. So, how is this industry coping with the new changes? Is it recovering, or is it still grilling under the after-effects of the global pandemic?

Our team at Assetsoft has years of experience in working with real estate companies and keeping up with trends to help in better project management. We have used that experience in curating this article.

Here we discuss the pre and post-pandemic changes in the retail industry and how it in turn reshaped and changed the real estate business. Read on to find out what it means for your real estate company and how you can rethink your strategy and leadership to steer through these tough times in business.

The effect of the pandemic on retail stores

According to Forbes news reports, consumers in the USA spent more than $211.5 in e-commerce in 2020 itself. Most of this came from a shift from retail shopping, and that crowd steered towards e-commerce due to restrictions in travel and general social distancing norms. Though these trends started in 2020 during the pandemic, some of these are here to stay and reshape the retail industry. Here’s how.

Touch-free shopping

When it came to shopping, the most significant aspect of it before the pandemic was to see and feel things before investing money in them. Now customers readily buy home utility products to homes themselves on online platforms.

Credit or debit card purchases at retail outlets are becoming obsolete, and no-touch digital payments are rising. Like Amazon has launched its new no checkout shops where you can simply pick up the stuff you want and walk out without any interaction or payment. How does it work? The money is deducted from your bank or Amazon wallet without you having to worry about direct human contact. Many retail stores started using their stores as storage units and started selling their goods online to beat the rising e-commerce sales.

Everything stores are trending

Mass-scale retailers who do not specialize in one type of product but sell a wide variety of products are trending in the market. Stores are now expanding their products from just groceries to selling utility products and merchandise all under the same roof to attract more customers. Why? Simply because customers tend to go out as less as possible due to the pandemic, and when they do, they want all their shopping needs fulfilled in one place.

Malls and stores take a hit

Malls and other retail stores like clothes and electronics were categorized as non-essentials during the beginning of the pandemic and had to close shop. One of the biggest mall owners in the US, Simon Property CEO David Simon, said that he lost worth 10,500 days of shopping business right after closing down due to the pandemic. It was getting harder to make rent as most shops were not selling anything to be able to make rent. It became an extremely volatile situation for the Commercial Real Estate owners and property managers. David Simon also mentioned that he had only collected 71% of the rent in July 2020, and 29% of it was due to the COVID-19 crisis and lack of business.

E-commerce vs retail shopping during pandemic

When most retail shops took a hit during the pandemic, e-commerce was thriving. People shopped from homes and that saw a major rise in consumer buying tendencies. According to NCL survey reports, e-commerce saw a 44% rise in year-over-year sales, whereas retail saw a 3.5% decline in sales. How did this affect Commercial Real Estate (CRE)?

Warehouses soared in demand due to this rise in e-commerce sales. According to the Bloomberg news reports, companies like Amazon, Walmart, Target, and more expanded their warehouses three to four folds within the last two years of the pandemic. This helped many CRE owners to stay afloat in this crisis-driven market. Though their retail shop tenants were not able to pay rent, their warehouse tenants were increasing their demand.

What recovery looks like for the retail

Everything is not so grim in the long run. Even retail shopping quickly adapted to new trends to keep itself relevant in the market.

Hybrid shopping is becoming an everyday reality, and retail shops need to follow this trend. People get a glimpse of the products on online sites and then make the final purchase inside shops or the other way around. Or like Amazon started its no-checkout stores where there is no human contact during retail shopping, yet it offers the experience of in-store shopping. Retail shops have to bring in digital innovation and proper technology selection to advance in the post-pandemic era.

Retail is moving on from the pandemic

The commercial real estate business, when it comes to retail shops, has suffered more during the pandemic. Many companies even filed for bankruptcy due to the pandemic. Are you a commercial real estate owner struggling to maintain all of the properties under your portfolio, make rent, and still stay afloat in these crushing times? You need to start using the proper technology selection in project management to streamline your work. Digitalize your processes, invest in real estate that is in demand like warehouses and slow down on the construction of new retail spaces like malls or shops.

It is time to rethink your strategy and leadership; take a moment to regroup and revisit your business plans and customize them according to the present market trends. The real estate market and economy, in general, have become very unpredictable since the pandemic so you need to stay constantly updated and quick on your feet to work around these problems.

At Assetsoft, we assist in planning strategy and leadership for real estate companies; we also offer expert project management services. Our tech experts can also help you with the right technology selection to streamline your property management tasks, be it commercial or residential real estate.

Wondering how we conduct our work and what other services we offer? Speak to us today to get more details.

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How Big Retailers Like Walmart Are Pushing For New Technology For Automation

Wed, 24 Mar 2021 11:55:13 -0500

Walmart has made the news several times already for its technological innovations. Even in 2017, Forbes was already reporting how the retail chain was moving toward high-tech. Four years later, it seems like this quality has remained faithful.

More than that, Walmart might be a leading name in the list of large retailers pushing for automation and similar technologies. It has grown to be considered a rival to Amazon, one of the world's most prominent innovators on multiple fronts.

On its own, automation has also been a central concept in real estate and multiple industries. Large brands backing its development could prove vital support for further improvements this year.

If you’re interested in implementing automation, make sure to work with professionals. As you’ll see in this article, rushing automation can be a dangerous move. We invite you to contact our robotic process automation services to guarantee results.

Walmart’s considerable move toward digitization

Let's start with a look at Walmart and how its investments can pave the way for innovation on multiple fronts. Recently, CNBC released an article detailing the chain’s plans to improve its technologies.

Considerable development is how Walmart plans to dedicate several stores purely for fulfillment. It plans to turn these fronts into automated warehouses. This move anticipates consumer demand increases as the pandemic subsides.

Walmart has been testing automation since 2019, implementing systems to process orders. However, automating more stores will drive the company to test other configurations, solutions, and providers.

The number of stores planned for automation and the actual extent of the strategy is still unclear. However, we can learn a couple of things from recent reports.

Fulfillment automation

Primarily, the automation strategy aims to rid employees of having to retrieve every item within an order. Fulfillment centers will combine human and machinery resources for this task. Ideally, robots will deliver the items to an employee for order assembly.

Additionally, workers will only handle fragile items. This move can prove vital for maintaining profitability since online groceries spiked in demand during the pandemic. Technological innovation has enabled Walmart to survive—and even benefit—from the pandemic’s changes.

The extent of tech spending by Walmart

While the CNBC report didn’t mention capital expenses, Bloomberg does provide a number. According to the article, Walmart plans to invest around $14 billion between supply chain optimization and process automation.

It’s worth noting that this amount will add to the $10 billion budget spent on CAPEX last year. The article goes into the fulfillment goal behind this development, but it also mentions a 79% growth in eCommerce sales for the retail giant.

With the announced wage increases, these plans seem to be part of a previously-determined strategy. However, the pandemic forced the company to “speed up” several plans, including these two.

Digital adoption: A crucial factor for competitive relevance

Before closing Walmart's subject, we also want to go through this 2019 article from Market Realist. It also sheds light on Walmart’s innovation efforts, but it offers great insight into how these attempts have benefitted the company.

It's worth noting that Walmart has gone beyond mere automation. It's a great example of digital adoption and how this strategy can be crucial for a company's growth.

The Walmart case study

Walmart used to be one of the biggest retail chains around the world. We say “used to” because it has proven to be a mighty name in the eCommerce space. The company has invested considerable resources to remain competitive in front of companies like Amazon.

Sure, Walmart has become a prominent force in the online retail industry, but what does that mean for real estate? Technological implementation is behind this growth, and today, virtually any company has access to the same software.

Retail and technological innovation

Walmart has also led innovation in the industry. In Mexico, Walmart developed an app for customers without a bank account. It enables clients to deposit cash into their app to use online or in physical stores. It even works with other bills.

It would be an understatement to say that Walmart is an example for any retail brand. One of the major hits from the pandemic to traditional business was their under-preparedness. Rushing the move toward remote work and digital adoption was a considerable investment during a period where financial uncertainty was the norm.

What can commercial real estate learn from this?

Property managers can learn a couple of things from Walmart’s example. The first one is what we already mentioned: digital adoption is a vital advantage in many ways. It allows for more versatility and resilience in case of turmoil.

However, digital adoption requires consideration, mainly because it's a broad concept that includes different approaches. If you wish to learn more and ensure success, we advise you to work with a professional digital adoption consultant.

On the other hand, it also exemplifies what property managers should look for in commercial tenants. As the global economy recovers with vaccination and easing lockdowns, choosing the right tenants makes a world of difference.

Property managers will have to keep in mind their prospects' innovative efforts and how they've weathered the crisis. Retail was one of the most prominent pandemic victims, yet Walmart managed to survive thanks to their technology implementation.

Retailers have been pushing for store automation for years now

Walmart isn't the only name behind the demand for automation developments. It's also not the only one spending years on it. Retailers have been pushing for automation to overcome eCommerce's growth for a while, as this article from The New York Times in 2018 shows.

While most developments were from China, it sheds light on how automation has been necessary for years. Robots for item management and shopping apps have been growing in popularity in recent years.

Store automation and big data implications

As the article mentions, store automation requires companies to keep their eyes on customers at all times. It has nurtured concerns over customer privacy because of all the data gathered from these users.

However, that’s important news for big data analysis. Companies can gather information like locations, product preferences, rush hours, and more. So far, this information has helped anticipate when more personnel is required.

Nevertheless, this information can prove invaluable when deciding on property investments. Data like higher traffic areas and residential spaces nearby commercial properties are vital for proper automation. Yet, it also offers a unique insight into an investment's potential returns.

2021 predictions: Will automation become a necessity for businesses?

As we've explained, automation is likely to become more than an advantage shortly. This article from Forrester also agrees with that thesis. Automation has evolved from an exciting technology to a lifesaver for countless businesses.

Between remote work, recessionary concerns, and a need for digital solutions, 2020 provided enough reasons to prioritize process automation. 2021 will likely maintain this momentum, paving the way for significant developments we can't overlook.

1. IDEPs becoming commonplace

Intelligent document extraction platforms offer unique advantages for real estate companies. It enables firms to manage contract analytics, measure risk, and more, parting from data extraction. Developments in machine learning can make this technology the standard for plenty of firms.

2. Automation taking a holistic approach

Automation will evolve from a unique technology to a portion of a more extraordinary approach. Modern software solutions integrate seamlessly with automation features. That process automation will likely be more easily accessible as a feature in other platforms.

3. Rushing automation will take a toll

The speedy implementation of automation scripts came with consequences. As companies feel pressured to implement it out of necessity, false expectations and user errors are commonplace. 2021 could bring new obstacles to these cases.

Which trends could develop from this demand?

Finally, this increase in demand for advanced automation developments will nurture growing trends. Before closing 2020, The Enterprisers Project released an article about upcoming trends for this year.

Before closing, let’s go through them to help you get an idea of what to expect.

1. Re-evaluating current automation initiatives

Companies will realize the mistake of implementing automation without a specific focus. As the consequences start to manifest, many firms will refocus their efforts to evaluate implementation results and correct mistakes.

2. Process optimization for proper RPA

Robotic process automation won’t work if there’s a problem with the process it’s trying to automate. Companies will notice the importance of optimizing all automatable processes before implementing automation scripts.

3. Expanding automation uses

Automation has been standard in finance and accounting departments. However, social media marketing and customer engagement have started to enjoy process automation. As users get used to the technology, more uses will become commonplace.

4. Data privacy will become the main concern

One of the main concerns about automation is how it depends on big data. If an automation solution has security “backdoors,” this data could become compromised. Data privacy will likely gain considerably more attention as RPA becomes more popular.

5. Automation integrations will become crucial

Finally, automation will gain more popularity as it offers more integrations with ERP, CRM, and other software types. Similarly, apps that offer automation capabilities will become significantly more valuable.

The Road To Recovery For Canadian REITs: A Look

Tue, 16 Mar 2021 08:00:00 -0500

REITs are a mixed bag regarding how they perform during economic recessions. Mainly, REITs focused on short-term leases are among the worst victims. COVID-19 has proven that there's a lot of truth behind this "rule of thumb."

However, have all REITs in Canada gone through the same hardships? We've commented extensively on how real estate has come with a handful of unexpected statistics. Some markets plummeted, whereas others flourished amid the crisis.

Now, the vaccine has started its first rounds throughout the globe. Several industries promise recovery, but is that true for REITs? The answer is a bit more complicated than “yes” or “no.”

The first stop of the road: Impact

Naturally, the first step in the road is to resist the initial impact. Yahoo! Finance offers excellent insight into the worst-hit REITs in Canada. They also highlight how travel restrictions signified a considerable handicap for some firms.

Luckily, curbing this damage has been possible with exemplary leadership and technology implementation. We’ve personally helped and witnessed how modern solutions have helped several clients overcome the initial struggle.

Let’s analyze the three examples from the article to see what we’ve been through.

American Hotel Income Properties

AHIP is an apparent victim of the pandemic, entirely focused on hotels. Additionally, they were undergoing a rebranding and renovation project that halted its cash flow. The pandemic was the last straw, resulting in job losses and ceasing operations.

In April, the trust had to suspend its monthly distribution, and management needed to defer March distributions. As a result, directors and executives took advantage of the situation and bought hundreds of thousands of assets.

Cominar

This diversified trust suffered the most damage from its mall assets. The order to close non-essential spaces was disastrous for a company with nearly 80% of its portfolio consisting of non-essential services.

It marks the second REIT primarily dedicated to non-essential services. Therefore, it's easy to see why portfolio diversity is decisive regarding a company's quick recovery chances. It's a worthy consideration even for those less affected.

RioCan

Finally, RioCan focuses on mixed-used and retail-focused properties. It's not difficult to spot the problem with that sentence. Again, it's proof of how REITs focused on retail, office, and other non-essential sectors faced the most significant struggle during the pandemic.

It's also worth noting that the main advantages noted in the article related to portfolio diversification. While it might be "too late" to implement said strategy, it can be a necessary adaptation for embracing recovery.

The second stop of the road: Surviving

After overcoming the first hit, the next step is to implement damage control measures to reduce the damage. The first stop tests a company’s preparedness. The second stage focuses on emergency measures.

The best way to assess the “survival” episode of the pandemic is this article from MSN money. The main question is whether REITs can overcome the current downturn. This point of view should shed light on how companies can face the upcoming recovery period effectively.

With the sudden surge of COVID-19 spikes, we can say we’re still exiting this stage.

Most vulnerable REITs

Naturally, the most vulnerable REITs are those focused on sectors affected by lockdown measures. That includes the ones we’ve mentioned already, but also gyms, cinemas, and office spaces.

Additionally, the article mentioned that office space hasn't been as affected as retail spaces. That doesn't mean it's free from scratches. Office demand has been plummeting, and, likely, it won't recover entirely due to the popularity of remote work.

Could the future look optimistic?

Not everything is grim, even for those sectors. The vaccine is excellent news for everyone, but even that's not everything. For instance, bond yields remain at a decade-long low. Cheap debt can help property values to increase with more robust demand.

Additionally, most of the worst-affected REITs entered the pandemic in stable conditions. Therefore, the pandemic's hit could've been much worse. Projects like redeveloping unused space into residential assets can prove a vital advantage during recovery.

Vaccination efficiency

The upcoming vaccine is still a significant development for all industries. The efficiency of the initial and following rollouts will determine how quickly recovery makes its way to REITs. Proper vaccination is crucial for reactivating several sectors.

Hospitality, office space, and similar markets depend on crowding to an extent. Social distancing and lockdowns were the biggest hit to these markets. As these measures become less necessary, the rebound could be significant.

The third stop of the road: Immediate recovery

Now, we can say we're finally in 2021, but we're not ready for recovery. COVID-19 infection spikes hit the world during this first quarter. That means we're not in the recovery period, but we're close to it.

The immediate recovery "stop" refers to the initial re-balance in demand. Vaccination means people will slowly go back to their offices and "normal" lives. That's a slow period, and that's what we mean by "immediate" recovery.

The Smart Investor provides an excellent analysis about REITs and their chances for recovery this year. It’s worth noting that the article focuses on the Singapore market, but we can still learn great insight from the article.

Hospitality

As we mentioned, the hospitality sector will remain slumbering as long as borders remain restricted. For instance, the article mentions Asia Pacific’s largest REIT, which lost 28% of its year-on-year revenue.

Sustained recovery is unlikely to come as long as borders are closed. Repurposing spaces for healthcare and similar flourishing industries is a considerable advantage for companies suffering similar losses.

Retail

Retail REITs have experienced excellent recovery rates with Singapore’s reopening phases. Some trusts even enjoyed over 60% recovery. While footfall will remain low thanks to social distancing, telecommuting can make up by increasing spending considerably.

Again, this report proves the importance of adequate vaccination. Allowing people to return to their favorite malls and stores is critical for ensuring recovery for REITs in Canada. Malls with open space amenities also enjoy a considerable advantage.

Commercial real estate overall

The article also mentions a hybrid approach for commercial real estate. The need for office space has been through significant reconsideration. We've already mentioned repeatedly how remote work can become the standard for many workers.

That’s where hybrid models come in: combining office presence and remote work. Not all employees enjoy working from home full-time. Some will come back to their office entirely, and others will prefer to divide their time between telecommuting and their company’s offices.

Industrial

Finally, industrial REITs have been the most vital sector during the pandemic. According to the article, the main advantage comes from their tenant and portfolio diversification. Most of these tenants can withstand the crisis's damages.

Curiously, that’s also true for industrial REITs in Canada during the start of the pandemic. It also seems to be the same for REITs with properties around the world.

The last stop: Long-term implications

Finally, long-term recovery won’t come this year. Several experts agree that the world won’t go back to pre-pandemic times. That doesn’t have to be a negative outlook. Most industries will probably recover almost completely, and that will benefit most REITs.

For instance, the office and hospitality sectors are some of the biggest victims. They’re also expected to go through the slowest recoveries. However, not everyone enjoys working from home, and a majority of people will likely return to offices—at least partially. Travel demand has been low solely because of travel restrictions.

Once various industries start to gain their strength back, REITs will follow suit.

An optimistic outlook

Even before 2020 ended, some experts were already advising which REITs to buy for this year's recovery. The Motley Fool is a great example. In its article, it mentions two REITs to keep in mind for investment.

Regardless of opinion, it's promising to see investors' interest in REITs and their chances of recovery. We can also learn what's attractive about these companies, which helps us understand what to do for a full recovery.

SmartCentres

This REIT endured significant damage, mainly because of its retail-centered portfolio. However, SmartCentres benefits from excellent retail tenants, with retailers who already demonstrated their resilience during the pandemic.

That's why we always say that the tenants' quality decides the future for REITs. For optimal recovery, companies must reevaluate their current tenants and which ones are showing good numbers. Shifting focus can be a lifesaver.

Inovalis

Inovalis is somewhat similar to SmartCentres, but instead of retails, it focuses on office space. Again, many workers will prefer to stay home after the pandemic if possible. But that doesn’t mean office space will disappear.

Remote work doesn’t always mean working from home. Coworking space is a vast market to look out for as social distancing subsides. Repurposing office spaces accordingly is a worthy consideration.

Should we wait for things to go back to normal?

After reading all the data, the answer should be obvious. Things will go back to normal, at least as much as possible. However, recovery won't come from waiting but from adapting and seizing opportunities.

That means that the road to recovery begins with making good choices before the pandemic, but that’s not the end. Make sure to stay on top of market developments, assess your assets and learn how to adapt when you need.