Editor’s Choice: Interesting times

This is an exciting step for us in this year of our 10^th anniversary and the response we have had so far from both subscribers and commercial sponsors has been tremendously encouraging. We believe this new biannual publication which focuses on global retail trends, new concepts and innovation meets a need in the European retail real estate industry which remains on a rollercoaster 21 years after Amazon launched as an online bookseller and Ebay opened its auction website.

Indeed, the retail real estate sector has never been more exciting, writes Nicky Godding, our new RetailWatch Editor, in her inaugural editorial. That sentiment is echoed in an interview with Josip Kardun, Group CEO at Atrium European Real Estate and the new Chair of the ICSC European Board. The retail real estate sector has undergone a remarkable development in the past decade, he claims. From representing around 20-30% of mixed investment portfolios, retail can now make up as much as around 40-50%, he told RetailWatch in an interview. Indeed, retail has become a key pillar for virtually every real estate investment strategy.

A reason for this, Kardun believes, is the inherent flexibility of retail assets. 'Investors accept that while retail is more management intensive than, say, the logistics sector, you can always make retail assets more attractive. It is more management intensive, but also more sophisticated and there is more that you can do with retail real estate for a turnaround. The sector is maturing and doing very well.'

Institutional capital discovers outlet centres 
As the sector matures, it is also attracting a much broader spread of institutional capital. Outlet centres, for example, have entered the mainstream, according to speakers at the recent ICSC European Outlet Conference in London. Speaking at the conference, Timon Drakesmith, CFO of Hammerson and managing director of Premium Outlets said: 'Outlets have become more institutionally acceptable in the last 12 months. The sector is no longer limited to big funds and operators.'

In fact, outlet centres currently form one of the most attractive niches within the retail real estate sector with players like Hammerson and Madrid-based Neinver reporting sales increases of up to 10% in recent years. By contrast, many traditional shopping centres across Europe have seen flat or minimal growth at best during the post-crisis period.

The upshot of all this is that more players are coming into the market, and that creates its own problem: there is more capital than retail product, albeit that everything has its price. 'Investment expertise lies in correctly identifying where in the economic cycle your targeted retail investment sits,' says Kardun. 'There is product if you're willing to spend money. The question investors need to answer first is whether they are right in terms of vintage and cycle.'

A lot of certainties are no longer valid
But as the investment world is well aware, it is precisely this question that has become more difficult than ever to answer. 'A lot of certainties aren't valid anymore. If scientists and economists can't agree on what the future holds, how can the real estate sector?' he asks rhetorically.

We don't claim to have the answers either, but what we do believe we can offer is insights into the key trends shaping the sector from some of the leading players across this diverse terrain. We are delighted to launch our first edition of RetailWatch with an interview with Julian Dunkerton, the man behind probably the most ambitious fashion retailer in the world: Superdry. We also talk to retail real estate personalities about the future of retail and explore themes like the importance of experience, retail diversity and visual impact.

A novelty for us is in our first edition of RetailWatch is our city focus on Milan which comprises an entertaining tale of the Ferrari and the Fiat by our City Watch correspondent Andy Watson, until recently the chief investment officer for LaSalle Investment Management in Europe. Milan retail is polarised between world class high street shopping and a local shopping centre industry punching below its weight, Watson writes in his inaugural feature.

Two decades after two of the biggest retail innovators opened their doors, retail landlords are finally wising up to the fact that your worst enemy could be your best friend and your best friend your worst enemy, to quote the late Jamaican reggae singer Bob Marley. And now that we are exploring quotable quotes, 'May you live in interesting times' is an English expression believed to be a translation of a traditional Chinese curse.

For publications like PropertyEU and our new sister RetailWatch, interesting times are a blessing.

Judi Seebus
Editor in Chief PropertyEU