Mark Twain once famously remarked that rumours of his death had been greatly exaggerated. Doom-laden predictions on the demise of shopping centres as everyone would buy online were equally off the mark. Shopping centres are alive and well, but they are changing and adapting, Property EU’s European Retail Investment Briefing held in London has heard.
Mark Twain once famously remarked that rumours of his death had been greatly exaggerated. Doom-laden predictions on the demise of shopping centres as everyone would buy online were equally off the mark. Shopping centres are alive and well, but they are changing and adapting, Property EU’s European Retail Investment Briefing held in London has heard.
‘The internet seemed a threat, but retailers have reacted successfully, showing they can have a good ecommerce strategy and still do well in the shops,’ said Florencio Beccar, director of retail investments EMEA at CBRE Global Investors.
‘A few years ago shopping centres and the high street were virtually written off, but that is all changed now. Everyone can see that the physical property still has a role to play, so people feel more confident investing in retail,’ said Kim Politzer, director of European research at Invesco Real Estate.
Shopping centres continue to dominate the retail sector. According to CBRE research, they accounted for 23% of all European retail investment in 2014, up from 17% in 2013. High street retail is a distant second with 10%, followed by retail parks and warehouses at 9%. Listed property companies have been doing the bulk of the investing, followed by institutional funds. Prime shopping centre yields have been converging, but they still vary widely, with Budapest at 7%, Italy at 6% and the UK and Sweden just above 4%.
The biggest change is driven by urbanisation, as people increasingly want to do their shopping where they live and work. ‘Demographics, technology and urbanisation are converging, as people are moving into the city and shopping in the city as well as online,’ said Andy Watson, CIO for Continental Europe at LaSalle IM. ‘We prefer urban shopping centres that are hard to replicate, with good transport links.’
Urbanisation is also a common trend in a European market that varies drastically from region to region. In Northern and Eastern Europe, shopping centres are important because of the cold climate, while in Southern Europe the high street and local shops still have a role to play. But everywhere malls are being built in urban locations, where the demand is. ‘Urban centres are the winners in every country,’ said Beccar.
The other Europe-wide trend is the demand for a better environment, with customers wanting a good shopping experience, smart shops and also a choice of pleasant food and drink offerings. ‘There is a lot of renovation and redevelopment of shopping centres going on now to create a more exciting environment to show off the brand and increase footfall,’ said John Welham, head of European Retail Investment at CBRE.
‘Even in the Nordics, where shopping centres tend to be functional and atmosphere can be disastrous, they are finally coming to understand that the environment matters, and change is under way, which will attract international retailers keen to show off their brand,’ said Marcel Kokkeel, Ceo of Citycon. He predicted that there will be two winners in the industry: ‘The huge shopping centres like Westfield and the everyday, local, grocery-anchored shopping centres. Everything in between is at risk.’