“The future has many names: For the weak, it means the unattainable. For the fearful, it means the unknown. For the courageous, it means opportunity.” This quote is attributed the French author Victor Hugo (1802 – 1885).
The European retail real estate industry has been thinking about the many names of the immediate future—namely those of the year 2017—for quite some time. For the trends that will shape the industry and the challenges it will face have long been apparent—except for the political turmoil of concern for all markets, such as the result of the Brexit referendum or the worsening situation in Turkey, of course.
In any case, it is clear that the growth of online retail will also leave its mark on the next year. Manuel Jahn, Head of GfK’s geomarketing consulting division, emphasizes: “Online and offline are not competitors, but partners. The future of retail is determined by companies that combine both channels for better. ‘Pure Players’ have already seen their zenith. The smartphone is becoming the most important means of communication between retailers and consumers, whether for information, ordering, or payment.”
Julian Wilkinson, Asset Management Director at intu, also underscores the synergies that result between the online and the offline: “Research we recently carried out with Savills shows that nearly nine out 10 sales still ‘touch’ a physical store in some way. This emphasizes the continued importance of a great physical presence that will allow brands to accommodate shoppers keen to switch back and forth between different channels as they explore, share ideas, and buy.”
Too much or too little food?
Given the increasing relevance of online commerce, the industry recognizes that malls have to position themselves as sustainable “places to be.” The industry is already working hard on this.
James Cons, Managing Director of Leslie Jones Architecture, explains in this regard: “We’ll see more developers re-purposing space to give schemes alternative means of attracting higher footfall and longer dwell times. Creating a destination with a sense of place through mixed-use re-development is at the heart of this and will require bringing more food, leisure, workplaces, and residential spaces to existing retail schemes for consumers who no longer view the different divisions as separate entities.”
As regards more food, Jonathan Doughty, Regional Director & Head of JLL Foodservice Consulting, has a caveat: “2017 is going to be a tough year in foodservice. It is going to be the year in which shopping centers around Europe conclude they have ‘too much food’ instead of too little.” For those that have just crudely increased the number of restaurants and food courts in malls, it’s going to be hard. Mix, day part, economics, and guest psychology cannot be ignored—but according to Doughty many have done just that.
The bottom line is that retail is expected to remain a core asset in 2017, but it has to be asset-managed to meet actual consumer demand. As visitors’ expectations rise, landlords and brands must work together to meet the overall need to deliver more than shopping.
Image: Hammerson
David Atkins
Chief Executive of Hammerson
“As we look ahead to 2017, we are mindful of continuing economic and political uncertainties, but we are confident that our best-in-class retail portfolio positions us well to respond to consumer trends. Polarization will continue as consumers combine the convenience of online retail with experiential shopping trips, incorporating the very best retail brands, innovative pop-ups, fresh dining concepts, and leisure activities. Marking the only major retail scheme to launch in the UK in 2016, Victoria Gate in Leeds has already welcomed over a million visitors in the first few weeks of opening and has been dubbed the “Knightsbridge of the North” due to its premium proposition, demonstrating the dominance of high-quality retail. In 2017, we will continue to focus our portfolio to capture growing consumer trends for convenience, experience, and luxury retail.”
Image: McArthurGlen
Henrik Madsen
Managing Director Northern Europe McArthurGlen and Member of the ACROSS Advisory Board
“McArthurGlen expects the coming years to bring innovative and collaborative ways for the Group to develop the consumer-outlet experience further. Across our portfolio, we are looking to offer an overall elevated experience as entertainment becomes a focal point in everything we do. In addition to this, McArthurGlen’s gross lettable area will continue to expand as we open new phases in Roermond, the Netherlands, and Parndorf, in Austria in Spring 2017. Next year, the Group will open its 23rd center in Provence, France. We will also begin development in our 10th country of operation in Málaga, Spain. We have an exciting pipeline of projects and we expect next year to be a pivotal year for the outlet market as we embark on a new generation of outlets.”
Image: Sonae Sierra
Fernando Guedes de Oliveira
CEO of Sonae Sierra
“Technology, demographics, urbanization, greater global connections, and climate change are significantly shifting the paradigms of retail real estate. In this context, different retail formats are emerging in our tenants’ stores, with retailers offering online shopping in-store and giving greater importance to in-store experience and displays. In the same way, greater sector professionalization may lead to an increase in outsourcing and the trend towards urban regeneration is creating opportunities for developers of mixed-use schemes. Moreover, business strategies should be based on environmental sustainability and other related socio-economic aspects to create shared value and reduce the environmental impact.”
Image: Neinver
Carlos González
Managing Director of Neinver
“The sector will continue to grow and we will continue to see the entry of new tenants as retailers look at outlets as a means for growing their businesses. Specialized asset management skills, clear and well-executed retail strategies, and accurate market knowledge will be key. Moving forward, we expect continued growth in the trend of providing a full and quality experience in outlet centers with a shift towards concepts that include experiential, design, and food offerings. Additionally, we will see an evolution in the adaptation to new technologies in response to consumers’ needs, customizing products and services accordingly. On the investors’ side, we expect increasing appetite for outlet assets and new equity players entering the market due to the excellent performance witnessed in recent years.”
Image: ECE
Joanna Fisher
Managing Director Center Management at ECE and Member of the ACROSS Advisory Board
“We look forward to the openings in Verona and Bielefeld in 2017. In general, increased competition in bricks-and-mortar and online trading is likely to lead to continued falling frequency in some places. Fortunately, sales are quite stable in our centers. We have to do two things in shopping centers: firstly, secure and increase frequencies. That comes from good customer-oriented marketing, targeted service offerings, and a continuous stream of new, exciting promotions and events. Secondly, we need to innovate and adapt the latest digital trends for our shopping centers. Our new pilot project “Digital Mall,” a local online product availability indicator for the Alstertal Einkaufszentrum in Hamburg, is leading the way in this regard.”
Image: Immofinanz
Dietmar Reindl
COO of Immofinanz and Member of the ACROSS Advisory Board
“We will continue to expand our two retail brands Stop Shop and Vivo! After raising the number of Stop Shop retail parks to nearly 70 in 2016, we are currently working on further proprietary developments in Serbia and Poland, as well as on a market entry in Romania in 2017. Demand from our tenants is very gratifying and we are well on the way to being by far the leading retail park operator in the region. In addition, we are opening another Vivo! shopping center in Krosno, Poland in 2017. Finally, we are continuing with the rollout of our Vivo! brand in existing shopping centers in our portfolio.”
Image: ATP
Christoph M. Achammer
Chairman of the Board ATP architects engineers and Member of the ACROSS Advisory Board
“In unsettled times, it is once again up to the real estate industry to provide stability. In addition to this, the process of designing and building is facing a digitalization-driven revolution that will lead to huge productivity gains. The incremental use of a digital twin in all building assignments—from the initial idea via all phases of design and construction to the accompaniment of the operation of a building—is a safeguard against things going wrong. It makes the building process truly industrial for the first time and demonstrates the financial impact of lifecycle-oriented projects.”
Image: Cushman & Wakefield
Francesco Della Cioppa
Head of Asset Services Italy at Cushman & Wakefield
“Two major trends characterize the Italian shopping center market and are expected to continue through 2017. The first one concerns the polarization of shopping centers based on size, location, merchandising mix, and performance, with increasing distance between prime and secondary assets. Top international brands will further focus on prime regional schemes, thereby sustaining higher rental values and lower investment yields; on the other side, secondary and less attractive formats will drastically reduce their catchments and therefore expected rental values. The second trend originates from the limited availability of schemes responding to international standards: Investors willing to seize opportunities in the Italian market are now also targeting smaller centers in secondary locations and interest in southern regions is growing.”
Image: Mollenhoff
Manuel Jahn
Head of GfK’s geomarketing consulting division
“2017 will be the year of insight and reconciliation: online and offline are not competitors, but partners. The future of retail is determined by companies that combine both channels for the better. “Pure players” have already seen their zenith. The smartphone is becoming the most important means of communication between retailers and consumers, whether for information, ordering, or payment. It makes the customer a smart shopper—the connected consumer—who inquires about the most attractive products from a suitable and fair-priced selection at the right time. What does this mean for retail concepts? Selection today means offering the customer products and services beyond the usefulness of a given product, including emotions and values. Successful locations save the customer the most valuable asset: time. It must therefore be clear whether they want to make possible inspiring and surprising shopping experiences or fast and practiced routine purchases. Since the customer has the means to compare prices and services at any time, even the most beautiful store with the best service for the same product cannot permanently price higher than its neighbor. Shopping can neither be spatially nor temporally ring-fenced. Those who can address the customer effectively and independently of space and time will be successful. This creates growth potential even for physical locations and concepts—whether at train stations or filling stations, on highways or high streets, in retail parks or shopping malls, or in pop-up stores or fulfillment centers.”
Image: Fashion House Group
Brendon O’Reilly
Managing Director of Fashion House Group
“Fashion House Group will further strengthen its position in its key market—Russia. Based on excellent experience with “Red Carpet Alley” in our outlet center in Moscow, we see a bright future for luxury brands in the outlet. We will focus on extending our premium offer—both for phases opened so far and phase III. We believe will will maintain spectacular business growth in Romania with new tenants in Fashion House Outlet Centre Bucharest. Last but not least, we will continue investing in e-commerce platforms, which is an important element of the Group’s omni-channel strategy.”
Image: GTC
Thomas Kurzmann
CEO of GTC
“With its extensive experience earned during the construction of 13 shopping centers across the region, GTC today is constructing another large-scale shopping mall in the heart of the fastest-growing district in Warsaw. On top of that, GTC is in the final stage of preconstruction for a shopping center in the Wilanów district of Warsaw, Poland, and the Ada Mall shopping center in Belgrade, Serbia, where work is scheduled to begin in Q1 2017. In total, 200,000 sq m of retail and office developments are in their planning stages, which guarantees further growth over the next three years.”
Image: Hermes Investment Management
Chris Taylor
Head of Private Markets at Hermes Investment Management
“Retail will remain a core asset class in 2017, but it needs to be asset-managed to meet consumer needs. For example, we are investing in assets such as Royal Victoria Place (RVP) in the UK to improve the restaurant and leisure offering. We are also increasingly seeing investment in retail within large-scale, mixed-use schemes that address demographic lifestyle changes such as urbanization, globalization, and technology—as can be seen at Nina in Manchester, Paradise in Birmingham, and Kings Cross in London. Mainland Europe will also offer some particularly attractive retail returns in 2017, which we will continue investing in through our strategic partnership with our likeminded investor, Redevco.”
Image: Hunter Real Estate Management
Mark Hunter
Managing Director of Hunter Real Estate Investment Management
“Following an unpredictable 2016, we would envisage international investors placing an increased emphasis on established partners in 2017. With sterling having fallen in value but consumer confidence remaining high across the UK’s retail sector, there are numerous opportunities for international investors to generate significant returns from favorable exchange rates and stable rents. Likewise, in Central Europe, our experience as a long-standing investor points to consistent demand and stable income in convenience retail, which is performing well over the long term.”
Image: IGD
Roberto Zoia
Director of Asset Management and Development at IGD
“We hope that the market will move in the same direction in 2017 that it did in the first half of 2016, when there was a veritable boom in the volume of retail real estate deals and in the sales of shopping center retailers. IGD will move forward with the investment pipeline outlined in the Business Plan for 2016-2018. The real challenge for next year will be to continue to be able to report the growth in operating results recorded at our shopping centers over the last few quarters. By focusing on our core business, we intend to maintain a high level of performance at the centers, independent of macroeconomic and political factors, similar to the ones that fueled uncertainty among international investors in the second half of 2016.”
Image: Ikea Centres
Milen Gentchev
General Director at Ikea Centres Russia
“As one of Europe’s largest retail market by sales, and with a lower retail density than other countries, there is a massive opportunity for ambitious retailers to capture market share and enviable positions in key Russian retail destinations. With the highest footfall and brand recognition levels in Russia, MEGA centers are at the heart of this growth. Our focus is now on continuing to develop our centers together with our tenants to ensure they are enjoyed and valued as meeting places. This will ensure we remain the first choice for international and domestic brands as well as for our extensive and loyal customer base. The full shopping experience is very important for us. Our aim for 2017 is to make sure that Russian consumers receive a best-in-class retail and leisure experience as the entire MEGA centers portfolio has undergone major commercial upgrades, including refurbishments to the facades, galleries, leisure spaces, and outside areas. This, together with our new food & beverage upgrade “Taste Boulevard” in MEGA Teply Stan (which opened in April 2016) and our second at MEGA Khimki (opening soon), enable us to provide our loyal customers with a full-day experience. Generally, Russian consumers are more than ever looking for deals and good value for money for their purchases. We believe that strong brands such as Superdry will continue to perform in this context.”
Image: intu
Julian Wilkinson
Asset Management Director at intu
“Research we recently carried out with Savills shows that nearly nine out of ten retail sales still “touch” the physical store in some way. This emphasizes the continued importance of a great physical presence that will allow brands to accommodate shoppers keen to switch back and forth between different channels as they explore, share ideas, and buy. Certainly all retailers will continue to maximize their online presence next year, but this increasingly forms part of holistic strategies that reflect the blurring boundaries between the online and offline worlds, with customers visiting stores for experiences exclusive to the physical world. In 2016, we saw a number of “pure play” brands build up their bricks-and-mortar presence or move into shopping centers for the first time, such as DFS and Seat, which both opened new small-format stores at intu centers this year. Retail and leisure also continued to come together across the industry, represented by the transformational developments underway at our own centers in the UK and Spain. These are important trends that will continue into 2017 and beyond, as shoppers’ expectations rise, retailers utilize new in-store technology, and landlords and brands work to meet the overall need to deliver more than simply shopping.”
Image: JLL Foodservice Consulting
Jonathan Doughty
Regional Director & Head of JLL Foodservice Consulting and Member of the ACROSS Advisory Board
“2017 is going to be a tough year in Foodservice, but it is going to be a profitable year for us. 2017 is the year that “too much food” in shopping centers will be heard around Europe. For those that have just crudely increased the number of restaurants and food courts in shopping centers, it is going to be tough. Mix, day part, economics, and guest psychology cannot be ignored—but many have done just that! It is the difference between food agency and food consultancy, it’s all about foodie intelligence in the market today. “To eat is a necessity, but to eat intelligently is an art” (François de La Rochefoucauld).”
Image: Land Securities
Rob Jewell
Portfolio Director at Land Securities
“With the rise of online purchases, landlords are increasingly diversifying shopping center offers to entice visitors. Land Securities is a market leader in creating destinations popular with the modern customer, as seen at Trinity Leeds and White Rose Shopping Centre. Trinity Leeds is at the forefront of curating events that provide visitors with an extraordinary and memorable experience each time they enter the center. White Rose Shopping Centre is delivering a 65,000-sq-ft (6,000 sq m) entertainment hub for its loyal customer base with a state-of-the-art IMAX Cineworld multiplex and six in-demand restaurants. These careful additions, supported by fully-integrated digital campaigns, have bolstered footfall, sales, and dwell time in the centers by offering guests unmatched retail and leisure opportunities.”
Image: Lar Espana
José Luis del Valle
Chairman of Lar España
“Shopping center activity in Spain has increased in the last year and we expect this trend to continue in 2017. In the case of Lar España, the leader in Spain, our figures show a higher growth rate than the Spanish average both in sales and footfall. We are confident that this trend will continue in 2017 thanks to the constant management improvements being implemented in our assets. We also believe that investment activity in shopping centers in Spain will be strong again in 2017. Lar España will keep on playing a leading role in this area. We currently have an investment capacity of €240 million and shopping centers, which account for 76% of our portfolio, are key in our investment strategy for 2017.”
Image: Leslie Jones Architecture
James Cons
Managing Director of Leslie Jones Architecture
“There’s no doubt that Brexit and Donald Trump will continue to dominate headlines in 2017, but the retail property industry will prevail in the face of the unknown. We’ll see more developers re-purposing space to give schemes alternative means of attracting higher footfall and longer dwell times. Creating a destination with a sense of place through mixed-use re-development is at the heart of this and will require bringing more food, leisure, workplaces, and residential spaces to existing retail schemes for consumers who no longer view the different divisions as separate entities.”
Image: Lunson Mitchenall
Neil Hockin
Head of Shopping Center Leasing at Lunson Mitchenall
“With the retail market more diverse than ever, retailers are continuing to work to find their points of difference. Brands such as Misguided, a traditional online retailer, have turned heads with their move into physical space with their new store at Westfield, Stratford. Despite the increasingly digital market, we are likely to see more brands follow in Misguided’s footsteps. The company has highlighted how important physical retail space can be and the value of incorporating innovative design into stores. As more traditional high-street retailers rationalize their portfolios, this trend will make for an interesting mix that landlords and developers will be keeping a keen eye on.”
Image: Master Management Group
Paul Kuśmierz
CEO of Master Management Group
“Despite the growing saturation of Poland’s commercial real estate market, it still provides excellent opportunities in my opinion. Master Management Group is currently constructing a large-scale retail and entertainment complex in the Warsaw district of Bielany. Galeria Młociny, with a total GLA of 70,000 sq m and the opening scheduled for late 2018, is already over 50% leased and has attracted top global brands. This shows that retailers believe in our vision. We are convinced that today’s customers expect outstanding architecture and a distinctive offering with lots of leisure and sports facilities, green outdoor spaces, and exciting destinations for foodies. We will provide all this and much more besides, so I expect 2017 will be a good year.”
Image: MK Illumination
Thomas Mark
President of MK Illumination
“Shopping centers will continue to play a significant role as trading markets in 2017. Due to the sustained growth in online and mobile commerce sales, the centers need to meet these changes with clever digital solutions. They can gain a competitive edge by creating a space that provides a special experience. Approximately 90% of all trading in Europe still takes place in physical stores. For 2017, MK Illumination offers innovations such as augmented reality and interactive, 3D light motifs to enhance the shopping experience. Emotional experiences help increase awareness and the time spent at a location and they have an impact on consumer behavior.”
Image: Meyer Bergman
Peter Evans
Asset Manager for CEE and Vice President at Meyer Bergman
“As we look to 2017, Meyer Bergman remains highly active and opportunistic about new acquisitions across all areas of retail. We will continue to monitor the market — especially within Germany, France, Italy, and CEE —for any retail-led opportunities that could further strengthen our presence in Europe. We’ve recently increased our focus on high street and luxury retail, as seen with our most recent acquisitions in Oslo and London’s West End, which we forecast as growing and promising markets. Moreover, online shopping is on the rise, especially in CEE, and we expect to see this trend increase over the next year. To counter this, we believe the push for food, leisure, and entertainment will surge during 2017. We are incorporating these trends into many of our assets, such as Forum Nova Karolina in the Czech Republic and Galeria Katowicka in Poland.”
Image: New West End Company
Jace Tyrrell
Chief Executive of New West End Company
“London’s West End is always evolving and the coming year will be no different, with retailers, landlords, and investors actively engaging in the area. London’s West End has seen a significant amount of investment into the area over the past year and we anticipate that this trend will continue. In fact, 2017 will introduce new developments from the start with new brands, such as Lululemon, opening their doors, public realm improvement works starting on Bond Street, and preparations for the arrival of the Elizabeth Line (Crossrail), which will bring more than 60 million extra visitors to London’s retail heartland.”
Image: Queensberry
Paul Sargent
Chief Executive and Co-Founder of Queensberry
“We’re seeing a change in the way consumers shop and how they use traditional centers. Shoppers have made up their minds about what they want to buy before a visit and use centers simply to source products. To combat this, we ensure our developments are much more than shopping and leisure destinations by taking a design-led, holistic approach to ensure we meet the needs of the catchment and our retailers, while complementing the environments in which we operate. We look at how retail, leisure, hotels, residential, and offices work as a whole to define a place and ensure we aren’t just creating generic schemes. Partnership are key and we create better places when we work closely with councils, as demonstrated at Friars Walk in Newport and our partnerships with councils in Sheffield and Barnsley.”
Image: Redevco
Eric Van Dyck
Member of the Board and CIO of Redevco
“2016 demonstrated that the combined factors of slow growth, the potential rise of anti-globalization, and political instability make our business context increasingly risky and uncertain. Most of this cannot be controlled or influenced. What we can do is make sure the various funds we manage on behalf of our clients are as future-proof as possible. We have strengthened our platform through several acquisitions this year and we will continue to do so in 2017. Guided by our ongoing assessment of cities and their top shopping destinations, in combination with our knowledge about consumer behavior and trends, we will grow our volume of assets under management by investing in property in thriving retail destinations. To us, creating value also includes making the assets as energy efficient and least harmful to the environment as possible. With a nearly 90% BREEAM-certified portfolio, it is our ambition to be more effective in this area by working more closely with relevant stakeholders and tenants.”
Image: reteam
Jacques Sinke
CEO reteam international and Member of the ACROSS Advisory Board
“Desirable retail destinations are ones that have a people focus—“what’s in it for me, for my family and friends, for my community?”—and are ready to accommodate change. Change will continue to be the key element touching all our lives in 2017. The three fundamental reasons why people visit retail destinations, market (to buy), meeting, and moving (stopping on their way past), need to be top in operators’ and developers’ minds and reflect their actual offer and positioning. That is exactly why Asset Action and City Action are core business at reteam.”
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