If this year’s ICSC European Conference in Warsaw had a theme song, it might be REM’s 1987 hit, “It’s the end of the world as we know it (and I feel fine)”. While much ink has been spilled on the negative impact of weak demographics, anemic economic growth and rising e-commerce on the traditional shopping centre model, others note that the industry will rise to the challenge with innovative new models.
“Is it that there is too much retail or that the retail is in the wrong place?” asked David Fletcher, chief of executive of Pradera, which last month signed a €900 million ($965 million) deal to buy 25 prime retail parks next to Ikea stores in eight European countries. Fletcher argued instead that it’s often possible to find more positive submarkets at the city level. Pinpointing the right places isn’t always easy, Fletcher said. “Trying to figure out where those improving cities are is going to become more and more difficult for what I call ‘spreadsheet investors,” he warned.
Poland isn’t short of such cities. In the 10 years since Warsaw first hosted RECon, the Polish economy has grown by 47 percent, and purchasing power climbed by 68 percent, notes Patrick Delcol, CEO of Central & Eastern Europe for BNP Paribas Real Estate, and president of the Polish Council of Shopping Centers. The stock of shopping centers has risen with the economy, he said, growing by 2.5 times, to the point where Poland now has about as many shopping centers as Spain on a per capita basis — and the consensus number for growth is 2 percent annually for the next 10 years.
Multi-use centers will become an increasingly popular option for developers, according to Gerhard Groener, managing director of IKEA Centres, a trend that will require developers to expand beyond their traditional areas of expertise. Groener noted that half the $1 billion IKEA centre under development in Shanghai is for nonretail space. “You need to stick your neck out to make this work,” he said.
It may also require some creative thinking to envision a completely new kind of retail. If shopping centres embrace “brand playgrounds” such as Samsung 837 in New York City and use “big data” to tailor experiences, they can remain relevant, said futurist Howard Saunders. “The future is scary, but don’t be scared,” he told the audience at the Warsaw Hilton.