Rowan Verwoerd, Portfolio Director for Germany, Austria and Switzerland at Redevco
Cities have been agents of change throughout their history. Today, observers wonder whether cities themselves are keeping up with the pace of change that is shaping urban life.
From our perspective, we see many successful examples of inner cities managing change creatively and proving their resilience.
Take inner city retail, for example: despite all the doom and gloom, you will find a surprisingly diverse and nuanced picture of retailers, in line with our assessment: Players who persist in offering a classic department store concept on several floors with a standardised product range and mediocre quality of advice should not be surprised if customers "vote with their feet" and stay away. The alternatives elsewhere are already too diverse, both in city centre retail itself and online.
The situation will be very different, however, if careful market analysis and the exploitation of structural opportunities succeed in replacing the existing department stores, which are now increasingly empty, with attractive mixed-use concepts, where shopping becomes a community experience and - in combination with other services and uses - increases the length of time customers stay.
We are certain that the function of city centres will not disappear – quite the opposite. Recent surveys show: People of all ages are drawn to city centres. If we can combine the shopping function with other services, create exciting destinations and integrate it into attractive experiences, people will continue to visit city centres in large numbers.
Meanwhile, expectations of what is on offer have changed significantly across all age groups. Convenience and services such as food, health and body care have now overtaken fashion as important retail segments relevant to city centres. Regionality, quality and sustainability are particularly important to three quarters of respondents in city centre retail.
As most of the existing department store sites are located in central, attractive city centre locations, a versatile mixed use with retail, gastronomy, living, leisure and hospitality can be an extremely attractive for investors.
Rediscovering the central marketplace
Mixed use also offers the opportunity to bring attractive and sustainable office space back into the city centre. The central marketplace function, which more and more people are rediscovering, meets this need and can also be implemented in co-working concepts. The following applies: The combination of digital and physical touchpoints must be considered from the outset.
Gone are the days of the favoured suburban satellite office. In the post-pandemic working environment, recent surveys show that European employees spend an average of one day a week working from home. In this context, we see employers looking to provide their staff with offices in appealing central locations. City centres offer both excellent public transport links and a wide range of shopping, sports, education and after-work entertainment options, as well as cultural and gastronomic sites.
In summary, attractive mixed-use developments are key to making city centres future-proof, sustainable and popular places. In this context, those real estate players who are can combine in-depth knowledge of cities with many years of project development experience are best placed to create long-term value for tenants, customers and investors. From an investor’s perspective, the mixed-use concept increases exposure to multiple users, creating opportunities for new groups of tenants, from both the private and public sectors.
About the Author
Rowan Verwoerd is Portfolio Director for Germany, Austria and Switzerland at Redevco.
