The social distancing and isolation measures imposed by governments to curb the coronavirus pandemic have wreaked havoc on shopping centres. As a result, commercial and retail operations have had to find innovation solutions in order to remain relevant in the changing environment.
Here's how Scentre Group (ASX: SCG), an ASX retail real estate investment trust (REIT), has responded to the coronavirus pandemic so far.
How is Scentre fighting coronavirus?
Scentre Group is the owner and operator of Westfield shopping centres in Australia and New Zealand, boasting more than 12,000 outlets. In order to combat the disruptions caused by the coronavirus pandemic, the company recently launched its 'Westfield Direct' initiative across its portfolio of Westfield shopping centres.
Westfield Direct is a drive-thru, contactless, click and collect service that enables consumers to purchase products online from Westfield retailers and pick them up from a designated location. The initiative will allow consumers to access more than 350 retailers in a socially responsible manner. Westfield Direct will offer products from various sectors including clothing, takeaway food orders and fresh food.
Scentre Group and other commercial operations have come under pressure from landlords and tenants to implement rent relief initiatives in order to compensate for the reduced foot traffic. The Westfield Direct initiative is designed to keep retailers and foot outlets in operation, whilst also protecting the companies own balance sheet and financial performance.
How has Scentre performed?
The Scentre Group share price has plunged more than 41% since the start of the year, with the coronavirus pandemic weighing heavily on the company. Although the company's share price has bounced substantially from its March lows, Scentre Group and other commercial operators face an uncertain outlook.
Scentre Group released an announcement last month, providing the market with an update on its earnings outlook for 2020. The Group noted that operations had performed in line with expectations during the early part of 2020. However, due to the coronoavirus pandemic, Scentre Group has suspended its outlook for the full year.
The company assured investors of its financial stability earlier this month by obtaining unsecured bank facilities that increase the group's available liquidity to $3.1 billion.
Foolish takeaway
The coronavirus pandemic is changing the way consumers behave, forcing stalwart commercial operations like shopping centres and office buildings to adapt. I don't think it would be surprising if we see services like 'click and collect' become a permanent fixture across shopping centres.
Although it remains uncertain whether such services will be sustainable or how they will influence the companies bottom line, this innovation is a step in the right direction. I wouldn't recommend buying shares in any A-REITs in the current market environment, however, if there is a pullback I believe companies like Scentre Group will offer great long-term value.
