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Covid-19 Economy Impact

Impact of COVID-19 on the retail sector: Egypt, Bahrain & KSA

Article-Impact of COVID-19 on the retail sector: Egypt, Bahrain & KSA

Speaking to Cityscape Intelligence, Savills puts the spotlight on Egypt, Bahrain, and KSA. While the timeline to contain COVID-19 remains unclear, this pandemic has significantly influenced the retail sector and will have a long-term impact on consumer behaviour.

Footfall and sales have dropped due to store and mall closures in addition to the movement restrictions implemented by many countries across the Middle East. The Holy Month of Ramadan is traditionally a high demand season for retail, but the market this year will be notably compressed, and it may take until after Ramadan for consumer confidence to return.


According to the IMF, Egypt will be the only country in the region to maintain growth as the world tips into recession. The organization predicted that Egypt will be the only MENA country to see its economy expand, anticipating 2% GDP growth this year before a slight acceleration to 2.8% in 2021. This came in the lender’s latest World Economic Outlook which forecasts the global economy to contract by 3% this year — the worst global recession since the Great Depression.

In Egypt, as part of the measures put in place to stem the spread of the virus, malls and shops have been allowed to open daily until 5 pm during the Holy Month of Ramadan while the nationwide curfew starts at 9 pm instead of the previous 8 pm and runs until 6 am.
James Bailey, Client Services Director at Savills Egypt said: “With this decision being announced, there has been a noticeable increase in the number of inquiries we receive as tenants have moved from ‘let’s wait and see’ to ‘please send me the lease so that we can sign.’ For example, the number of contractors on-site at Arkan in West Cairo who are fitting out units has increased by 60% in the last week.”
“We have also seen different terms based on real estate asset classes. Landlords are treating each situation on a ‘case by case’ basis and still assessing options to tenants including potential rental discounts/holidays and rent deferrals, while other landlords are still offering monthly payment plans which was already offered before COVID-19 took hold,” Bailey explains.


The retail sector in Bahrain has experienced the biggest impact so far at a time when retailers were already struggling, and rental rates have experienced ongoing downward pressure. Harry Goodson-Wickes, Savills' head of Northern Gulf said: “In 2019, the rental rates and capital values across the real estate market had experienced a marginal decline. Prior to the outbreak, the outlook for 2020 was expected to remain largely similar with minor fluctuations. Across the assets managed by Savills in Bahrain, we have received the largest number of rent relief requests from retail tenants. Across the market, relief requests have varied from rent reductions (both temporary and permanent) of up to 50%, to rent waivers up to 6 months, to relocation requests to smaller units and complete lease surrenders. Landlords are doing their best to balance these requests with meeting their own commitments as well as stakeholders. Where possible we encourage landlords and tenants to work together and support each other through these difficult times”


During these unprecedented times, shopping centre landlords and retailers are working closely to minimize losses in the Kingdom of Saudi Arabia. Shopping mall owners and operators are offering generous incentives to support their tenants by granting 1-3 month rent holidays, while some landlords are waiting for a likely end to the crisis before negotiating. Shopping centre landlords offering incentives in Saudi Arabia include Sahara Mall, Granada Mall in Riyadh and Al Rashid Mall in Alkhobar to name a few. 
Mutasem Alsheikh, Associate Director – Retail at Savills KSA said: “Our retail leasing team continues to progress discussions with major retailers in key developments, despite the slowdown in activity. On the other hand, some deals have been put on hold until the situation becomes clear.”
Savills has also noticed some changes and new additions to the lease structures. “One of the trends we have started to see is that many retailers are asking for a COVID-19 clause and/or any other health crisis, to protect their best interests against unforeseen major lockdowns in the future,” he added.

on April 29, Shopping Centres and retail stores were partially allowed to open in KSA with stringent health and safety measures, such as restrictions on number of visitors inside the store at the same time and no entry for children under the age of 15. While all entertainment and playing areas inside malls will continue to be closed.

In the short term, all operators are expected to heavily focus on sterilization and hygiene measures to support a healthy environment. Retailers will drive further awareness on health regulations and procedures to assure the community of higher levels of safety and sanitization and to ease concerns of visiting physical shop locations. 
“Under the conditions of the lockdown, many consumers in Saudi Arabia have relied on e-commerce to purchase both essential and non-essential products, which has led to a huge surge in online sales of up to 300% to 400% for certain brands, compared to pre-pandemic figures,” Alsheikh reveals.

“Retailers and shopping mall landlords should recognize that some consumers are likely to continue their newly developed e-commerce habits during and after the COVID-19 lockdown, which adds a new level of competition to the retail environment. With this trend on the rise, retailers need to tap into e-commerce through owned websites or through partnerships with e-commerce platforms, as people are expected to continue to make more online purchases after the pandemic is over.”


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