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Retail spaces evaluation formula will be different in 2030
03 April 2020 |

The retail segment will have to face several changes until 2030. The methods and metrics used to evaluate the assets will be very different. And despite the continued existence of physical spaces, they should converge even more with the virtual ones.

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«Brick-and-mortar isn’t going away, but traditional store metrics are actively being redefined to include factors like omnichannel sales, micro fulfilment, media influence and data collection», mentioned the latest study “The Age of Responsive Real Estate” from consultant CBRE.

The metrics which are currently used to evaluate retail spaces are based on occupancy rates, traditional long-term contracts – between 5 and 10 years – and a traditional logic of high credit low risk. But within 10 years, CBRE predicts that the evaluation formula for these assets will be based on different premises.

In the future, analysis of the balance between credit and risk will be differentiation, since «the startups and digital brands that can differentiate a retail property often have little to no credit, which means investors and lenders must decide whether they assume the risk for the “cool” factor». There will also be other ways of evaluating revenues given that «the potential revenue goes beyond four walls to e-commerce and an evolving fulfilment system». Occupancy contracts should also become more flexible and dynamic, according to CBRE, revealing that «many retailers want shorter terms (1-5 years, even month-to-month) and fewer restrictions».

Physical spaces will be so interconnected to e-commerce that «the retail business will converge into a single model known as “phygital”—as in physical and digital— where online and brick-and-mortar stores merge to serve the ever-increasing demands of consumers for convenience, speed and cost», predicts CBRE.

Another predicted change concerns business data sharing. If that sharing is currently limited to the strictly necessary, in 2030 there should be «more transparency between landlords and retailers».  This is actually becoming «paramount, as data becomes more readily available and the driving force impacting the bottom line».

Despite CBRE admitting that the retail segment will be on the frontline of this transformation, it also admits that the evaluation methods should change «across all property types as uses merge into more mixed-use, digital and adaptive environments».