Retail real estate development is facing unprecedented but exciting challenges, according to Jaap Gillis, COO of Europe's leading private real estate company Redevco. Gillis was speaking during a panel debate, led by Marc Espinet, partner at Property Market Analysis, at the International Council of Shopping Centres (ICSC)'s European Research Seminar, held in Amsterdam earlier this month.
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Top industry leaders discuss the future of retail real estate.
"It's the most dynamic period for the industry I've seen throughout my career so far. Dealing with the financial crisis, changing demographics, sustainability and internet retailing; it is very complex. In my opinion, the large, all-round independent developer is a waning profession. The successful ones who redevelop in the future will be integrated back into the construction and investment companies where they came from originally."
Gillis added: "In the Netherlands, the amount of shopping center GLA increased to 15 million m² between 1945 and 1999 and by about the same amount again between 1999 and 2009. We have seen a similar trend in Russia. It's impossible to maintain that level. This is not a sustainable model."
Glenn Aaronson, CEO of Multi Corporation, a fellow panelist, said developers are adapting to the new reality. "If there is one thing developers can do it's adapt to prevailing conditions. Multi is not moving into China, Brazil or India, but we will be dramatically changing in Europe. We are no longer developers, but redevelopers. The consumer doesn't want a new place to shop. They want a better place. The enemy of good is not evil: It's better."
He added: "Redevelopment is also more sustainable, it's about changing space. The reason many didn't redevelop in the past is that occupancy levels were good, rents were being achieved and there were plenty of people wanting to buy shopping centres. Now it's about making the best of what's there."
The best strategies have exceptions, of course. Multi is developing malls in Turkey where there are significant opportunities.
Panelist Hubert Stech, Managing Director at retailer Douglas Holdings, which operates across Europe, agreed with Aaronson. He said: "We see opportunities in diversification and higher levels of customer service."
So far so positive, but are the banks willing to lend? Yes according to panelist Severin Schöttmer, Director Special Property Finance at Aareal Bank in Germany. Aareal Bank is lending, he said, but research is key. "With our Retail Financing team we've been doing solid analysis for years. If developers and investors do not do research and adjust their strategies they will not survive in the long run. Therefore it is crucial to watch trends and, as a long term lender, discuss your views with your clients."
Aaronson agreed. "Banks will not lend on compromises. You don't have to be huge to be a destination, but you must be unique. Redevelopment for redevelopment's sake won't happen. Don't get caught up in what you think is today because it may not be what tomorrow is, that's where the value of good research lies."
Source: Nicky Godding Communications
Gillis added: "In the Netherlands, the amount of shopping center GLA increased to 15 million m² between 1945 and 1999 and by about the same amount again between 1999 and 2009. We have seen a similar trend in Russia. It's impossible to maintain that level. This is not a sustainable model."
Glenn Aaronson, CEO of Multi Corporation, a fellow panelist, said developers are adapting to the new reality. "If there is one thing developers can do it's adapt to prevailing conditions. Multi is not moving into China, Brazil or India, but we will be dramatically changing in Europe. We are no longer developers, but redevelopers. The consumer doesn't want a new place to shop. They want a better place. The enemy of good is not evil: It's better."
He added: "Redevelopment is also more sustainable, it's about changing space. The reason many didn't redevelop in the past is that occupancy levels were good, rents were being achieved and there were plenty of people wanting to buy shopping centres. Now it's about making the best of what's there."
The best strategies have exceptions, of course. Multi is developing malls in Turkey where there are significant opportunities.
Panelist Hubert Stech, Managing Director at retailer Douglas Holdings, which operates across Europe, agreed with Aaronson. He said: "We see opportunities in diversification and higher levels of customer service."
So far so positive, but are the banks willing to lend? Yes according to panelist Severin Schöttmer, Director Special Property Finance at Aareal Bank in Germany. Aareal Bank is lending, he said, but research is key. "With our Retail Financing team we've been doing solid analysis for years. If developers and investors do not do research and adjust their strategies they will not survive in the long run. Therefore it is crucial to watch trends and, as a long term lender, discuss your views with your clients."
Aaronson agreed. "Banks will not lend on compromises. You don't have to be huge to be a destination, but you must be unique. Redevelopment for redevelopment's sake won't happen. Don't get caught up in what you think is today because it may not be what tomorrow is, that's where the value of good research lies."
Source: Nicky Godding Communications
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