‘The days of the stand-alone mall are numbered’

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Reuters EU

ABS CBN News.com

http://www.abs-cbnnews.com/business/03/18/13/shoppers-move-online-can-malls-survive-internet-era

CANNES – As growing numbers of shoppers move online, European mall owners are looking to pull in customers by including services that can’t be replicated on the Web like hospital care and government offices.

Malls must become more like full-service community centres to survive in the face of a growing list of failed retailers like HMV and Blockbuster, property experts at the annual MIPIM trade fair in Cannes, France, told Reuters.

On the flip side of that retail revolution, the experts see big gains in warehousing as more goods are sent and returned via post.

“The days of the stand-alone mall are numbered,” said David Roberts, the chief executive of architect Aedas, one of the five largest practices in the world. The company has been involved in city masterplan projects in Asia, Europe and the Middle East.

“In 20 years time you will find stores that sell books and DVDs replaced by sites that give people a reason to go the mall … art galleries, education centres and health and spa treatments.”

Florencio Beccar, fund manager of CBRE Global Investors European shopping centre fund, cited the recent purchase of a mall in Germany, saying the fact it included a large medical centre was “a big plus”.

“I once saw a clinic in a Brazilian mall where you checked in and are buzzed on a device when they are ready. In the meantime you go shopping,” he said. “With the ageing population in Europe you can see that happening more and more.”

CBRE Investors, which has about 14 billion euros ($18.2 billion) of retail property under management in Europe and 5,000 tenants, also owns a mall in southern Sweden with a library and a local municipal office, he said.

“More shopping centre developers will have early talks with these sorts of tenants as well as the big anchor retailers,” Beccar said.

Mall owners like Land Securities, Intu, Westfield and Klepierre have increased the number of restaurants and cinemas to persuade shoppers to stay longer, and offer promotions to reward frequent shoppers who can be tracked via their mobile phones.

COMMUNITY CENTERS, ADVENTURE PARKS

But these steps don’t go far enough, some experts say, in light of a forecast last month that 90 percent of retail sales growth in Britain, France and Germany between 2012 and 2016, or 91.5 billion euros, is expected to be online, according to the property arm of French insurer AXA, which manages 43 billion euros of assets.

As well as changing what’s inside, mall owners will need to borrow ideas from developing markets like Dubai and China where centres are part of wider mixed-use developments where people live or include open spaces where they spend leisure time, Roberts said.

“Convenience and Internet shopping has created a breakdown in community structures and there’s a gap there waiting to be filled,” he said.

“There is a complete lack of vision among many shopping centre owners,” said Joe Valente, a managing director at JP Morgan Asset Management, who helps manage 7 billion euros of real estate in Europe.

“The big thing that’s missing is that unlike almost every other industry they haven’t caught on to building their own brand. Why not have a bluewater.com?” he said, referring to the large mall of the same name in southeast England.

“Landlords fear cannibalising sales but in 10 to 15 years they won’t have a choice because they will be cannibalised anyway,” he said. In other words, a growing number of shoppers will move online whatever malls do.

“On a mall website you could book a parking space, a restaurant table or your car to be valeted. Why do people go to Covent Garden?” he asked of the central London district.

“There’s nothing there you won’t find anywhere else but I would argue it’s a strong brand.”

Christian Ulbrich, chief executive for Europe, Middle East and Africa at property consultant Jones Lang LaSalle, said: “Stores will get bigger and become more like adventure parks that attack all of your emotions.

“For example, Globetrotter has a climbing wall and cycle track in its Frankfurt store to try out its products,” he said of the German outdoor clothing and equipment retailer.

WAREHOUSING

While retailers and mall owners struggle to find answers, all agree that warehouse property owners are the big beneficiaries of the change in retail habits.

Every additional 1 billion euros of online sales resulted in an average additional warehouse demand of approximately 72,000 square meters in Britain, Germany and France over the last five years, a report from warehouse landlord Prologis said last year.

“Logistics is the new retail,” said Simon Hope, global head of capital markets at property consultant Savills, referring to the way changing consumer trends will affect the way investors see property.

“There is a trend of money moving away from all but the best and most regionally dominant malls into logistics as they are economically shielded,” he said.

The fact that the Norwegian and Chinese sovereign wealth funds have recently invested in the sector, as well as a report that Brookfield, lower Manhattan’s largest office landlord, is trying to do the same, shows serious bets are being made on logistics property, Hope said.

Yields for high quality logistics property can be six or seven percent versus four or five percent for top shopping centres.

As another example of how retailers may re-think their operations, some are likely to club together to operate out of smaller logistics sites close to city centres to enable same-day deliveries, a service increasingly in demand, Ulbrich said.

“The issue they all face is that shopping is no longer enough of a reason to go to shopping centres.”

Orion Support Incorporated (OSI)

Dear Rick,

Following up from my initial request to you for support in finding a new office location for our company, Orion Support Incorporated.   Well, we moved in to the LTA Building on Perea Street, fifty meters or so from Paseo de Roxas this weekend, only a 4 minute walk to AmCham and under excellent terms.

While I think you assigned both Morgan Mcgilvray and Sherdil Rana to support our original request; as you know, Morgan was very tied up with his wife giving birth during the period we identified this location and negotiated with the landlord, Mr. Mike Arroyo. Yes, the former First Gentleman. But in my short interaction with Morgan, I can see that he is a solid, young professional.

With regards to Sherdil, I want to tell you that with 35+ years of interviewing hundreds and hundreds of individuals, I was impressed with his professionalism, focused support and “can-do” attitude  from the point of identifying our potential office space, and through the negotiation stages prior to the signing of our 6 year contract.  I was impressed with his considered opinions, insightfulness with regards to Philippine business culture and his sage advice related to our strategy in the negotiation process.  Sherdil was able to negotiate a rental rate per square meter about 150 – 200 pesos less than the going rate in this area, and with only a 7% increase after 24 months. Add to that, he secured for us three parking slots at no additional cost, two months security deposit versus the standard three, and two months advance rent to be applied to the front end of our contract versus the back end as is the case in most rental contracts. And, he got the landlord to repaint the entire office with three coats of mildew resistant paint at their expense.   But best of all, we were given a 6 year lease, with only having to give two months notice and forfeit only our two month security deposit to move out anytime with no additional penalty!

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