On 12 February, RICS organised its third European Retail Conference. After Madrid and Milan, this year the event was hosted in Amsterdam and focused on the current state of the retail markets, trends and challenges.
Starting with a site visit to the recently opened Mall of the Netherlands, the event proceeded with discussions chaired by Martin Eberhardt FRICS, Managing Director at Swiss Life KVG and Chair of the RICS Board in Germany.
Real estate investment volumes in Europe are still at record high level, but there is a slowdown and the expectation is that the end of the cycle is in sight. Retail investment, whilst still around the long-term average of €50 bn/year, has declined slightly in the past three years.
The participants believed there is still a bright future for both shopping centres and high streets, but they will have to continuously re-invent themselves. What are the main drivers causing this constant need for re-invention?
Bart Vink, Head of Research and Strategcy at Redevco, presented their City Attractiveness Index, which they use as a basis on where to invest. What they see happening is fewer cities becoming more attractive, with increased polarisation between attractive and less attractive cities increasing. This is shown by the fact that in 2012 Redevco ranked 210 cities, whereas in 2018 this number went down to 152.
Where cities can make a difference is sustainable consumption. For example, rankings exist on the top vegan cities in the world. There are many such rankings, but in Europe Amsterdam, Berlin and London are consistently amongst the highest scoring.
This does not mean it is all good. Restaurants are squeezed by margins and challenged by changing consumer needs. They have to keep re-inventing themselves to remain attractive.
From product to experience gives great opportunities for brands. Richard Lems, Director Format & Design at Rituals explained that a brand is all about being experienced, and the journey Rituals went trough from being a product to being a brand. The two main factors to differentiate a brand are through presentation and people, which is why Rituals spends a lot of efforts on training their staff.
To get the optimal shopping experience, the municipality, landlords and retailers need to work together. In some countries, the concept of a ‘street manager’ exists, which enables a high street to elevate itself beyond the individual interests of several landlords and retailers.
Pop-up stores and “bricks versus clicks” (shopping offline or online) are challenging and an opportunity at the same time. Pop-ups have a great value add for any shopping experience, but can be challenging for e.g. landlords and investors because of short term leases.
Finally, how can all these changes be taken into account when valuing retail? Are current valuation methods sufficient, or do new ways to be found. In line with the findings of the RICS Future of Valuations report, the panel moderated by Javier Kindelan FRICS, CEO Valuation Advisory & Vice President of CBRE Spain, concluded that the valuer needs to take on more of an advisory role, and be inventive in news of valuation.
As it is all about the retail experience, the question was posed on whether one could put a value on experience per square meter. Finding the answer to that may be a good starting point for the discussion going forward.
Did you miss the conference? Take a sneak peek.
Director Corporate Affairs, Europe