INTERVIEW: Growth of ecommerce puts town centre malls at risk

The growth of ecommerce is accelerating the need for repositioning of town centre shopping malls, according to Martin Mörl, CEO of Prelios Germany.

Speaking in an exclusive interview with PropertyEU, Mörl said that refurbishment and repositioning will be key themes in the mature German retail market over the next few years.

‘Weak centres in Germany, but also the UK and Italy will need active repositioning. The question is: how much retail is needed in view of the growth of ecommerce. We believe there is a trend towards inner-city centres and district centres. That could mean that town centres will suffer unless they have a large anchor. In any case, our focus is on inner-city schemes in Germany, Italy and the UK but we won’t be repositioning what is already successful.’

Centre management is becoming increasingly critical as a success factor in view of the onslaught of online retailing, Mörl argued. ‘If you look at how the retail market is changing, ecommerce is the big headline and that is affecting the job of centre management. In the past, the basic criterium for an ideal tenant mix was the presence of local, regional and international retailers. But today, who the best tenants are for a centre is a permanent discussion. As ecommerce increases, it is necessary to integrate new tools of communication like apps and video screens. A standard approach doesn’t work, every centre is very individual.’

INTERCONNECTIVITY
Advertising is key and different media need to be harnessed, he added, pointing to the possibilities offered by public buses, radio, print, TV and phone apps. ‘Interconnectivity is essential and the centre manager needs to be on top of it. Retail is all about multi-channelling and the competition is increasing. It’s a very tough market and that trend will go on. In fact, I believe it is accelerating.’

Prelios is also seeking to expand its shopping centre management activities for cross-border investors in Italy, Mörl said. 'Italy is becoming more attractive again to investors and we are well-placed to accompany German investors to the country. Prelios is much bigger in Italy than it is in Germany so we aim to use the opportunities there to expand our operations.'

Significant differences exists between the Italian and German markets, he noted. ‘In Southern Europe, you see a lot of centres based on the concept of a big hypermarket like Carrefour and Auchan with some smaller and medium-sized shops. We don’t have such big hypermarkets in Germany as anchor tenants.’

But even with one or two big hypermarkets as anchors, it is still vital to have the right retail mix, Mörl stressed. ‘A retail mall must have all the relevant tenants. Some centres need more upgrading and need to be split into smaller units, others need a greater variety of tenant mix. We often see shopping centres combined with entertainment, for example cinemas, bowling or a discotheque in Italy. That’s quite rare in Germany. In Germany, shopping centres are usually pure retail whereas in Italy they are more flexible in use. That brings with it certain benefits, but the retail concept must fit.’

In Italy, Prelios is focusing primarily on inner-city developments in cities like Milan. ‘Milan has the potential to become a role model for other places in Italy. We see opportunities for integrating historic cinemas, for example, and transfer of use, from cultural to retail purposes. Having said that, the restrictions are quite severe. In Italy, there are lots of old facades and it is sometimes difficult to obtain a permit. In Germany, it’s often easier as there are fewer historic buildings because so many were destroyed in the war.’

Prelios is also seeking to develop its fund management and credit servicing activities in Italy. According to market reports, Prelios is considering a joint venture with Fortress Group for the Italian non-performing loans. The fund management activities are strong in Italy, Mörl said. ‘We also offer valuation and credit servicing are more finance oriented there. We don’t do this in Germany.’

Nevertheless, there is room for further synergy between the operations in the two countries, he said. ‘We have good contacts with Italian brands and want to intensify these and bring our contacts from Italy to the German market. And in Germany, we have good contacts with potential investors in Italy. Our business is like a fast train with a permanent connection between the two countries. We want to build on that.’