Europe's largest listed real estate company Unibail-Rodamco does not have a clear horizon for its main business beyond the beginning of the next decade, CEO Christopher Cullivier conceded during a panel discussion on retail trends at the annual conference of the European Public Real Estate Association (EPRA) in Paris earlier this week.
'We have to work with a relatively short-term perspective of five years,' he said. Asked what Unibail-Rodamco was doing today to gear up for 2030 and beyond, Cullivier conceded that he was 'frightened' of the prospect of some of the scenarios sketched earlier in the day by Google inventor, futurologist and author Ray Kurzweil.
During a keynote address, Kurzweill painted a picture of the not too distant future in which virtual reality, 3D printing, renewable energy resources and nano robotics are part of our daily lives. 'Shoppers are not one single customer,' Cuvillier said. 'That makes our job difficult as well,' he added.
While online sales have made serious inroads into the shopping centre sector and IT continues to invade all parts of modern shoppers' lives, Cuvillier put up a strong defence for the brick-and-mortar experience. French cinemas are leading the way, he said. French-language cinema has a strong tradition in France due to government policy and while this policy in itself may be questioned, the fact is that French cinemas are full in spite of all the competition from TV and streaming sites like Netflix, he argued.
'People in France go to the movies. French cinemas realized early on that you need to recreate a physical experience and make it worthwhile. As a retail landlord, you have to understand your catchment area and customise your experience and offer. Food and beverage, hypermarkets and so on all work in different places.'
Commenting on the threats and challenges facing the retail sector, Sandrine Devillard-Hoellinger, a consultant at McKinsey, said shopping centre landlords need to have three different horizons. First of all, they need to make sure their centres operate optimally on a daily basis and that, for example, the bathrooms are clean. Second they need to start incorporating new technologies, for example to facilitate seamless parking at the centre. And third, they need to allocate capex for mall refurbishments and to create a new experience.
Shopping centre owners operate too much in silos, she argued. 'They need to test new apps and other possibilities more quickly. They also need to add different skill sets.'
Customer journey
Jaap Blokhuis, CEO of retail landlord Multi, which is part of the Blackstone group, said his firm was looking at the entire customer journey in a bid to anticipate future new demands from both retailers and tenants. 'There is a trend away from physical products to experience. We are already seeing a greater mix of leisure and experience with retail. For example we are seeing book stores with coffee corners and shopping centres with cinemas. There needs to be a greater interaction between leisure and retail.'
Blokhuis conceded that the retail real estate business model – and rents – were changing with the advance of online sales. 'But in the last few years we have seen increasing footfall and sales. We have to spend more on capex but we can afford to.'
With lease lengths for retail assets typically becoming shorter, one audience member questioned whether there might be a case to introduce rents based on catchment areas. But according to Cuvillier, that scenario is not on the cards. 'It's a fantasy to make retailers pay for the footfall we provide. What we need to do is make shopping centres attractive.'
The advent of driverless cars will definitely have an impact on the retail real estate sector, Cuvillier said. 'This could mean less space for parking and more drop-off points. The good news is that it means more space will be freed up for good shopping centres. Good space is scarce.'
