Redevco is present in almost all major European markets. In which countries do you see more opportunity today?
The answer to this question naturally very much depends on what you want to achieve. Redevco’s business is investing in retail real estate to generate attractive and stable returns for our shareholders. We can only do that by selecting those locations and stores that help retailers to be successful. If our tenants are not successful, we are not either. In this respect I would rather talk about cities in terms of opportunities than countries, as within each country we see strong differentiation in terms of the current and future attractiveness for retail real estate investments.
With that in mind, we do see opportunities in cities in all of the countries where we are active, even in those which are suffering relatively hard, like Spain. However, the number of cities we are interested in is shrinking. There is a retail revolution going on, which will translate in high vacancy and value losses going forward in many locations.
We believe that retail environments which combine strong demographic, economic and real estate market fundamentals with a high-quality city environment (culture, history, retail offer, gastronomy, etc) will become stronger in the future. But there are many cities that are not able to live up to this standard and their relevance as leisure shopping destinations is at stake. We are only interested in pursuing opportunities in cities and locations that we regard as 'future-proof'. We have developed a model to rank Europe’s cities in terms of retail real estate attractiveness, which can be found on our website.
Has online shopping influenced high-street retailing? Do retailers tend to use their shops more and more as show rooms to boost their online sales?
E-commerce is profoundly and structurally changing the way people shop and therefore the retail landscape. The fact that Redevco has a dedicated platform to research the consequences of this change for our business shows how serious we are about this topic. And indeed, in this research we did come across a number of examples of retailers who experienced a clear boost in online sales after opening a store. But this does not mean that their store only serves as a showroom and that conversion in store is not relevant anymore—on the contrary I would say.
However, it is not only about conversion in store. Retailers are trying to get the most out of their client base throughout all steps in the shopping journey. This means that they want to establish a cross-channel network which is able to service their customers in the best way, whatever route to purchase they take. The discussion about where the sales takes place, online or offline, thus becomes less relevant.
Overall I do agree that the marketing function of the store is becoming more prominent. We can see that it is becoming increasingly important - especially within the fashion sector- to have a few flagship stores to support the brand image in addition to the regular stores. Those stores are usually unique in nature and located at very expensive locations. But the volume of sales those stores generate is incredible. Consumers are more and more eager to visit these stores because of the experience they offer in addition to online.
This is one of the results of a consumer research we recently carried out in six European countries in cooperation with Q&A Consultancy. Findings suggest that consumers see strong benefits for the physical store in terms of experience and service. When it concerns price and efficiency-related factors they rather opt for online. Therefore, it is not only retailers who increasingly use the store as a branding/experience tool; this is the added value of the physical store for the consumer as well.
There has been a lot of talk about pop-up shops recently. What is your opinion of this format? Do you have any experience with pop ups in your properties?
Personally I am a fan of the pop-up store format, as it allows retailers to generate excitement and arouse curiosity. Consumers want to be surprised and therefore I am convinced that pop-up stores are a good tool to generate traffic. That being said, their success really depends on the brand and the offer, therefore it is great to have a company such as BrandSpots, which helps select the right location and get the most out of a pop-up store. Quite often pop-up stores are just a way to fill vacant stores on sub-optimal locations or to get rid of outdated stock; that is not where I see the added value of the concept. Redevco does not have much recent experience with pop-up stores, simply because we do not have units available for it. Our portfolio mainly consists of high-street units and vacancy is very low. Nevertheless, it is definitely something that is on our mind and I am sure that in the future we will be interested in having this format in our portfolio.
In your opinion, which trends will dominate the retail market in the near future?
I think one does not have to be a visionary to know that there are difficult times ahead for both the retail and real estate sector. We have to get used to low economic growth and due to e-commerce we will need less stores going forward. But despite that, I am very optimistic. I think this phase of creative destruction is necessary to make our retail landscape much more compelling. In upcoming years there will be a lot of experimenting with new formats, new formulas and new ways of interacting between retailers/producers and consumers. This in turn will result in less but very attractive retail environments. However, we need to manage the transition phase carefully, in order to make sure that some retail locations don’t turn into no-go areas.