The continued shift to online retail not only further highlights the need for online capabilities by retailers, but is also likely to affect future demand for commercial real estate, Moody's Investors Service has said.
Issuing its 2022 outlook for the non-financial sector, the group said that the road ahead appears stable, with 'strong economic growth, a continued recovery in earnings and a low forecast default rate' offset by 'more recent inflationary pressures and supply chain disruptions'.
The real estate, retail and travel-related sectors are likely to see 'long-lasting changes' as a result of the pandemic, however, with the ultimate effects of this change still uncertain.
Shift To Online Retail
"The shift to online retail long predates the pandemic but has been accelerated by it," the author, Richard Morawetz, a VP-Sr Credit Officer at Moody's, said. "While some demand has inevitably returned to the high street with stores reopening, the pandemic has further highlighted the need for online capabilities for retailers."
Retail sales have now reached, or in some cases exceeded, pre-pandemic levels, reflecting pent-up demand following lockdowns. However, in-store footfall remains "well below" pre-pandemic levels, the authors note, reflecting the migration to online sales.
"The trend has had clear, although contrasting, knock-on effects for the real estate sector," Morawetz said. "Demand for office space has fallen because of remote working, which will likely be a more permanent legacy of the pandemic. The effects are often delayed on account of the long-term nature of many lease contracts."
At the same time, the increase in online sales has also boosted demand for logistics services and warehousing, which is also expected to be "longer term", according to the authors.
Elsewhere, Moody's report anticipates continued strong economic growth, with GDP growth of 4.5% in the euro area in 2022 expected to be "above average".
While input cost inflation and supply chain disruptions will pose temporary challenges, these should recede over time, Moody's said.