Posted by: James Brown
Head of EMEA Retail Research
Jones Lang LaSalle EMEA Research
We posed three key questions to a group of fund managers, marketers and asset managers from a selection of leading retail real estate owners and investors. The answers were not all rosy – but what’s clear is that with challenges will come opportunities.
1) What will be the biggest challenge you face over the next decade?
The biggest challenge is how to cope with and embrace the continued rise of the internet – more specifically the mobile internet which is the next great game changer. Soon, consumers will be red scanning barcodes in-store to look up comparative prices on-line, and doing so on a mass scale. They will be using apps to communicate the good and bad aspects of their retail experience. The internet is still regarded as a direct competitor to physical stores – but without doubt it will bring benefits and opportunities aswell. Retailers and shopping centres need to respond to provide a shopping experience that outweighs the convenience and cost reductions that the internet offers – and this will create fun, exciting retail destinations that should be seen as a huge opportunity for active asset management.
2) How far do you think tenant mix will change in your Shopping Centres?
If the number of people choosing to purchase goods online continues to increase, then it is possible retailers will not be able to sustain large store portfolios, which will demand a uniform rethink of what to do with vacant space. Here are some options:
• Leave it vacant (for exhibitions, pop-up stores etc)
• Distribution (assembly, pick up or shipping of customer purchase from in-store on online)
• Temporary let – but not good for long term future
• Let to any retailer but with significant reduction on market value
Secondly, with more International retailers entering our market than ever before tenant mix will undoubtedly alter in our shopping centres. This may even support the necessary change to greater ‘experience’ – for instance US stores often run with the concept that customer interaction is key, where many British stores still tend to leave customers to it.
3) How far do you think the service you offer will change in your Shopping Centres?
More services in terms of restaurants, cafes, cinema and other entertainment facilities will be needed in the future. This need to change however contradicts with the commercial reality of a fully let centre – change may therefore be relatively ‘slow’.
Changing demographics will play a big part in service provision as well. Soon, Shopping Centre managers and retailers will not be able to tick all the boxes to say that basic needs are being met – the needs are changing and getting greater. Car parks are not easy to use, there are often too few toilet facilities of a poor standard and the Shopping Centre themselves are not easy to navigate. For the older shopper – a group which is growing in numbers – this will become ever more unacceptable.