Le mie ricette per la real estate communityby Ákos Budai
The European retail market has changed drastically and market players looking to stay in the race need to invest in innovation. Although there is no definite recipe for success, the general consensus is that offline stores need to transform into places that provide an experience. Panellists at the RICS European Retail Conference 2018 in Milan provided an insight into the key industry developments.
Internet has changed the game in retail, said Martin Eberhardt FRICS, Chair of RICS in Germany in his opening speech, which begs the question: will traditional shopping centres still work? He personally believes that it is not enough to have one use for a building anymore, mixed-use is the direction of the future.
The emperor is naked
Banks that have preferred investing in single asset classes need to get used to the idea of mixed-use, added Jerry Boschi, Managing Director of Development at ECE Italia. Mr. Boschi thinks that we’re going to be seeing more entertainment and complementary services in shopping centres. We don’t know the mix of the future – it will always depend on the specific location, commented Andrea Ometto, Asset and Finance Manager at Sonae Sierra.
In a dynamic presentation Riccardo Marini, Founder at Marini Urbanismo, compared shopping malls to the naked emperor. He thinks that market players need to wake up, stop being dinosaurs and move into the future. Apple has done that successfully – they sell the same product everywhere in the world, yet their stores are still destinations. People are looking for a fabulous urban experience, they don’t want to be in a box, Mr. Marini said.
Internet is driving retail’s evolution
Javier Kindelan, CEO of Valuation Advisory EMEA & Vice President CBRE Spain thinks that customer experience is going to protect shopping centres from the disruption of e-commerce. Many retailers will continue to have an offline store in addition to their online platforms, thanks to the so called ROPO effect (research offline, purchase online).
Francesco Ioppi, Real Estate Director at Finiper Group, also believes that retailers need to give experience to customers who want to feel pleasure accomplishing the duty of shopping.
Retail is not a passive asset, it has always been an evolution. Currently the internet is the main driver is this evolution, says Corrado Trabacchi, Investment Director at Orion Capital Managers, who thinks that owners of shopping centres need to be proactive.
Our world is not changing, it’s changed
According to Dino Gandolfi, Managing Director at Carrefour Property price is not the most important factor anymore, customers want to spend their time well. Retailers need to adapt and change the concept, however, it is difficult to future-proof food stores.
Ilona Taillade, CEO and Co-Founder at BrandSpots, who also thinks that some locations are going to become mixed-use, finds that it is not just about experience, costumers want difference. Shopping malls within one region often have the same anchor tenants everywhere, which is boring, she added.
Market player are not only reacting anymore, but have started acting, concluded Martin Eberhardt FRICS.
Investors need to be more selective
Giuseppe Oriani, CEO Europe at Savills Investment Management expects the European retail market to be very dynamic due to a shift in customer preferences. Retail still attracts a lot of interest from investors, underpinned by strong macroeconomic figures. The downside potential is, however, greater than the upside potential, he believes.
Corrado Trabacchi projects that growing consumer spending will allow for the increase of rental fees on the European retail market where yield compression can continue for now because there is a lot of liquidity.
Members of the European retail investment panel agreed that investors are not looking at regions and countries anymore, but rather at cities. Even investors beyond the continent are not talking about just Europe anymore, added Michele Monterosso, Managing Director at ING.
The biggest difficulty for lenders currently is not even pricing in the risk of e-commerce but having to look out for a possible rise in interest rates that can effect refinancing and exit. Lenders need to be selective, not just in terms of assets but sponsors as well. Banks need to be a step ahead and invest in innovation, Mr. Monterosso concluded.