Cushman & Wakefield presents its report on a new study that examines the future of shopping centres (“Survival of the Fittest”) | Changes driven by a combination of E-commerce, macroeconomic flows, demographic changes, sustainability and increasing globalisation
The shopping centre of the future is urban, highly flexible and offers good links to public transportation. It is in a constant state of flux and serves as a meeting point, a place of social interaction. The shopping centre of the future plays host to a wide range of events, entertainment types and services. These are the findings of the current “Survival of the Fittest” report published by international real estate services organisation Cushman & Wakefield (C&W). It collates the results of an extensive survey conducted by the international real estate consultancy among the largest and most active European investors in shopping centres. Together, the survey respondents own almost 1,500 shopping centres in Europe, equivalent to 20% of all European shopping centres.
“The environment within which shopping centres operate is undergoing a phase of fundamental change. This is true across the whole of Europe, not just in Germany,” said Inga Schwarz, Head of Research Germany at Cushman & Wakefield. “Our study was designed to identify the reasons for this change and show where the journey could lead in future. One key insight was that market participants named E-commerce as the most important driver behind this transformation. It is, however, just one of many factors. All players agreed that the change is being driven by a combination of E-commerce, macroeconomic flows, demographic changes, sustainability and increasing globalisation.”
Lessors focus on the tenant mix
The C&W study shows that lessors throughout Europe have developed an extensive set of measures designed to position their centres successfully for the future. The current focus is on the tenant structure and ensuring a wide variety of food and drink offerings. Through these measures, the lessors hope to increase both customer frequency and the time spent within the centre. As a result, the desired expansion of services also includes additional leisure facilities. Lessors are also keen to provide a more dynamic tenant mix.
Increasing demands on centre design and management
To position their shopping centres successfully, investors are looking for more attractive centre designs, as well as proactive and flexible management. The study participants are well aware that the shopping centres of the future must become than just palaces of consumption in order to survive. They require the centre management to organise events and expand the services on offer. The accelerated roll-out of incentive programmes is also intended to improve customer loyalty. The likewise applies to the implementation of multi-channel marketing strategies (the use of diverse channels, such as TV, Internet, newspapers, radio etc.) and the analysis of extensive customer data (referred to as “big data”).
Mobile technologies are indispensable
As the “Survival of the Fittest” study makes clear, mobile technologies are vital for future success. Many shopping centres already provide interactive screens, dedicated websites and apps, and free Wi-Fi. However, others are already looking further ahead and some shopping centres in the UK are pioneering new “beacon” technology. These beacons are small transmitters that use Bluetooth low energy technology and are installed in shops or around the centre itself. The transmitters communicate with customers' smartphones as soon as they enter the vicinity. If a customer has installed a smartphone app for the shop or centre, the program can scan his or her purchase history and issue suitable offers.
And it is almost certain that the beacons will soon be followed by “wearables”: portable computer systems that remain attached to the user's body. Wearables can be sewn into clothing or worn as a bracelet (e.g. sports watch) or glasses. These wearables can record the customer's desired purchases and display corresponding product or service offers directly while shopping – embedded in social media.
Changing relationship between lessors and lessees
The survey results show that the relationship between lessors and lessees will change in future. The more dynamic tenant mix desired by owners is expected to result in more flexible and shorter lease agreements. Negotiations must also be conducted to determine how the costs associated with the expected service offerings are included in the lease calculation, and now to handle sales conducted online rather than in-store.
Winners and losers
“Due to the plethora of factors currently having an impact on shopping centres, it isn't easy for investors to identify the winners and losers of the future,” said David Hutchings, Head of EMEA Investment Strategy at Cushman & Wakefield. “The size of a centre will not be a decisive factor in future. Large centres designed for the entire family and that offer entertainment facilities will have their place, as will smaller, city-centre galleries that address a particular consumer segment. It is, however, essential for a centre to have a strong identity and a proper justification for its existence. We also know that a forward-looking centre must be innovative and the centre manager must have a very good grasp of consumer requirements, retail, technology and real estate.” Inga Schwarz adds: “In Germany, we are currently seeing some very good ideas. Our study shows that German investors have seized the challenges posed by E-commerce and are already responding on a wide scale. They are therefore positioned ahead of market participants in France and the USA, and are beaten only by centre operators in the UK.”