Wall of capital leads to herd mentality, warns expert

The wall of capital in Europe is leading to a new herd mentality, according to Jaap Gillis, CEO of Bouwfonds Investment Management.

‘I don’t like it when everybody follows each other again and makes each other crazy. Opportunistic buyers are looking for higher leverage and they can get it. I would prefer to go to markets that everybody else has overlooked.’

While omnichannel retailing is clearly gaining ground, Gillis said he still believes in physical shopping. ‘The big trend that we see is that the operators of the big shopping malls are winners. But I think that there are still opportunities in the inner cities for enormous growth. Personally I enjoy an old city centre more than an old shopping mall, where you also have entertainment and leisure possibilities. I think that’s where we will see competition: between the inner cities and the big malls.'

Gillis said he generally preferred inner-city malls, because they normally offer good transportation links. 'Shopping centres have to be ready for their visitors, if they are too far out, they will lose customers. Remember, more than 50%, or almost 60% of the global population, will live in cities by 2050.’

Aside from inner-city schemes, Gillis also sees potential for convenience centres. ‘Anything in between will have to scale down to focus on convenience like in the past.’

Gillis believes landlords will have to cut their losses and convert secondary space in B-location retail streets in inner cities into residential or other uses. ‘Core will be even better in the future. Triple A shopping areas will shrink in size but will be more intense. Retail streets feeding into high street areas will vanish and capacity will be taken out and demolished. There’s too much space. The same is true of the office market, our market is changing rapidly. People are working in new ways with all the IT technology we now have and much greater mobility. We need 30% less office space. It needs to be taken out.’