Despite the initial challenges of 2020, such as stockpiling, pressure on supply chains and keeping staff and customers safe, all brought about by the COVID-19 pandemic and national lockdowns, Christie & Co note that the convenience retail sector was quick to adapt to the needs of the community, experiencing a positive year as a result.
The report emphasises that the sector experienced a seismic shift in 2020, driven largely by the headline impacts of the pandemic. There was a large rise in convenience store footfall, particularly within local and independent stores as consumers stayed at or closer to home, and the result was a significant improvement to the operational performance of many businesses.
This attracted buyers to the market and influenced a dramatic increase in demand for convenience retail opportunities. Christie & Co’s team observed a 19% increase in transactional activity in 2020, with buyer demand out-stripping the supply of available stores all year. This meant the timing to complete a deal compressed and asking prices were frequently achieved or exceeded after competitive bidding.
The report suggests there will be a long term and sustainable bounce from COVID-19, which could see a c.10% rise in convenience sales across the sector compared with pre-COVID levels.
In this year’s report, Christie & Co also surveyed a pool of convenience retail operators to gain an understanding of sentiment within the market, and the outlook for business operations in 2021. The results underpin the sentiment that the sector has done well by COVID-19, with a large proportion (38.5%) of respondents noting the pandemic had a positive impact on their business. Almost 50% think this boost could be sustained for up to three years before the sector returns to pre-COVID levels.
Christie & Co’s convenience retail price index for 2020 observed a 2.2% increase to average sale prices, reflecting a positive year. 41% of survey respondents feel prices will continue to increase in 2021, due to buoyant demand. Many operators are looking forward to further opportunities for growth in 2021, with 45% of respondents indicating they are interested in selling, along with 46% who are interested in buying businesses. As such, Christie & Co look forward to a liquid market in 2021.
Looking to the year ahead, the report also outlines Christie & Co’s market predictions which are:
- Buyer demand will continue to outstrip supply across the majority of convenience and forecourt instructions, leading to competitive bidding.
- Sellers should therefore balance expectations with realistic asking prices knowing that the proper marketing will ultimately result in optimum pricing.
- We expect more disposals to come to market as corporates and multiples shed the tail end of their portfolios.
Steve Rodell, Managing Director of Retail at Christie & Co comments, “I have worked across a few markets but I have to say, 2020 showed me that when the going gets tough the tough really get going. Whilst front line emergency services have been immense you cannot ignore the way essential local convenience-based businesses have risen to the challenges they faced. They really are at the heart of our communities. I completely understand why buyers want to run a local convenience store right now.”
Click here to read the full report, ‘Business Outlook 2021: Review. Realign. Recover’.
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