e back social distancing restrictions as much as health advice allows. Encouragingly though, there are already some signs of pent-up demand for social contact in real physical space. When given the opportunity between lockdowns, many people have made a beeline to the shops just as they’ve rushed back to the beach parties, often forgetting or disregarding social distancing. Humans are social animals. Certainly, foot traffic is still well down on 2019, but that’s to be expected. Unfortunately for shopping centres, as 2021 unfolds, it is likely this trend will continue.  The markets agree. For example, in the US, the Dow Jones Retail REIT Index was down 33 per cent from its 52-week high at year-end. It had jumped on November 9 after Pfizer and BioNTech announced successful Covid-19 vaccine trials, but has since increased at only half the seven per cent rate of other ‘old economy’ stocks represented by the Dow Jones Industrial Average. In Australia, the story is similar. While the S&P/ASX 200 finished the year only 8.5 per cent off its 52-week high, major shopping centre companies were all down from 20-40 per cent, with Vicinity Centres the worst-hit partly because of its concentration of assets in Victoria. The outlook is better for the broader Asia-Pacific region, with a huge reservation around particular centres that are highly tourism-oriented in Thailand, Singapore, Malaysia, Japan and Hong Kong, among others. Despite regional differences, there are some common themes globally that will play out in 2021. Here is what I expect. 1. The customer experience will worsen as shopping centre operators and their tenants increasingly facilitate e-commerce During the pandemic, the importance of e-commerce led some industry professionals, to the delight of Big Tech, to advocate the reconfiguration of parts of shopping centres into industrial space. If they get their way — and there is a good chance they will in a large number of cases — we’ll see the conversion of large-format stores and other convenient spaces into distribution warehouses and click-and-collect zones. The experience for on-site shoppers risks deteriorating sharply as the visibility of e-commerce activities becomes increasingly ‘in your face’. 2.  Food-service tenants that prioritise their takeout businesses will lose traditional dine-in customers Also disruptive from the customer experience standpoint, food-service tenants that have increasingly and visibly prioritised delivery from their retail premises will lose dine-in customers as they service their takeout business. Uniformed and helmeted food delivery drivers buzzing in and out of popular restaurants and cafes, often occupying seats while they wait for orders to be filled, bundles of plastic bags and boxes being passed across countertops, staff frantically running their eyes up and down lists — the situation in many popular restaurants and cafes has become a bad joke. An increasing number of food-service retailers will need to use ‘dark’ (aka ‘ghost’) kitchens for servicing outside customers, or their traditional customers will go elsewhere. Anecdotally, this is already happening. 3. Shopping centre rents will fall sharply on the back of retailer store closures, the conversion of retail space to industrial, and social-distancing mandates.  Retail store closures and bankruptcies have been the second great pandemic during 2020, and it isn’t going to end there. There will be a scramble for a smaller pool of new tenants, and this will end in some cases with acquiescence to the aforementioned conversion of space to industrial use. Industrial uses don’t stack up to retail in terms of rent.  Moreover, the economics of shopping centres are seriously at odds with the concept of social distancing. It’s a productivity killer. And let’s face it, you can’t market a shopping centre as a ‘social and experiential hub’ if you have to do the exact opposite: explicitly keep your customers apart from each other and interact as little as possible. Warnings, reminders and signage about the dangers of Covid-19 are common in shopping centres now.  Some will argue these ubiquitous reminders will reassure customers and help them overcome their fears. That may be true, but I speculate a sizeable minority sees it as a huge turn-off.  This begs the question of how long government social-distancing mandates will last if economics fail to return to pre-pandemic normal. 4. More percentage rent deals The resetting of rents will be bedded down partly by the growing prevalence of percentage rent lease deals. With the hit to shopping centre traffic not abating during the year as quickly as landlords would like, retailers will be more aggressive in their demands for risk-sharing. This will not be popular among landlords in Asia-Pacific. 5. Improving foot traffic but not to pre-2020 levels There will be a steady increase in foot traffic as fear eases and pent-up demand for social interaction increases. However, e-commerce will remain at a level elevated above where it would have been based on pre-Covid trends. This will be the case even with effective vaccine programs.  6. Store closures will accelerate before they stabilise Retailers will continue to close marginal stores to transfer sales online and lower rental costs. Most online sales by omnichannel retailers are not incremental but rather are transferred from physical stores, so it will make sense for them to close physical units. On the real estate side, this will be partly offset by growth retailers that quicken the pace of overseas expansions as restrictions are relaxed and cross-border movements of people, goods and capital are made easier. 7. Cross-border transactional volume will pick up strongly in the second half of the year.  According to Real Capital Analytics, the total value of commercial property transactions in Asia-Pacific declined by 40 per cent in the first nine months of 2020. Cross-border deals evaporated, and transactions that did occur were predominately by in-country investors. Look for this trend to reverse as the pandemic eases, particularly as there are going to be a lot of bargains to be snapped up. 8. Tourism will not recover in 2021 Some border restrictions will remain through 2021, although they will be increasingly directed at citizens of developing countries that are slower to launch vaccination programs. Overall, the outlook for recovery of international tourism and tourism spending is dire, with retailers relying on domestic rather than international tourism. All in all, 2021 isn’t looking pretty for the shopping centre industry. Many of 2020’s trends are going to continue, albeit, we will be hoping, with diminishing strength as the year goes on. This article was originally published in the February quarterly edition of Inside Retail Asia