REFIRE
Charles Kingston - REFIRE
One thing looks sure. The rise of the Greens, and the accompanying pressure on their political opponents to match their voter-friendly social outlook, will require more and more political lobbying from the array of real estate interests to ensure a fair hearing and the overdue reform of the constipated planning and regulatory structures that are in danger of strangling future growth. Not an easy path ahead.
Ten years ago we wrote (rather excitedly, if memory serves) about the purchase by Europa Capital of the Forum Steglitz shopping centre, on one of Berlin’s premier shopping drags, the Schlossstrasse in the south-west of the city.
The 32,000 sqm complex was the first multi-storey shopping centre in Berlin when it was built in 1970, and has remained a magnet for consumers even on a high street boasting three other sizeable shopping centres and hundreds of individual retailers. But its pull has been diminishing.
Europa Capital upgraded the centre and sold it lucratively in 2013 to Munich fund initiator Real I.S., afgter having boosted its occupancy from 80% to 99%. The new buyer said of its acquisition in 2013 that its new acquisition offered its investors “a high-value and sustainable choice of shops offering an attractive, secured cash-flow as well as promising perspectives for this most central retail investment.”
They clearly had shops on their mind. Now, Real I.S. is a deep-pocketed and experienced player, whose investors can hopefully take a long-term view of things. They’re now having to take a differentiated view, since retail isn’t working.
A visit to Forum Steglitz, and a neighbouring shopping centre Boulevard Berlin, can see immediately the trouble that these centres (and many more throughout Germany) are in. There are not enough visitors, not enough turnover, and at the rate things are going, there will soon only be shops on the lower floors.
The great gastro-concepts so breathlessly promoted a few years ago are clearly not going to save these centres on their own. And whether it’s the relentless march of e-commerce or the passivity of traditional retailers in embracing digitization to make their bricks and mortar stores must-visits, the evidence is clear. Within barely five years, the climate for retailers has changed almost beyond recognition. The days of signing 10-year lease agreements and waiting for the customers to roll in are over.
This was not at all what was envisaged when these emporia were built or refurbished, with very different numbers in mind. And in this climate, it’s no surprise that retail is at the bottom of so many investors’ shopping lists, and that skeptical financiers are avoiding the sector like the proverbial rash.
Earlier this month the Forum Steglitz centre managers came out of their shells and presented their new concept for the centre. Much is being made of its new ‘tenant mix’, which will include the grocery incumbent Lidl being displaced as the anchor tenant by a more up-market 4,600 sqm Edeka store, with its dazzling fresh cheese and fish counters.
Among the new customers of the grocery store from mid-2020 will be the office workers who are now taking over the second and third floors. A Berlin software company is taking 1,200 sqm, signing a 10-year lease like their retail predecessors used to do. A further 10,000 sqm in the upper floors will be adapted to co-working and flexible office solutions, a path which centre manager Rodamco-Westfield group has been treading in its other centres around the globe as the retail landscape is transformed.
If the life of a modern office building is now about twenty years before complete refurbishment, then so evidently is the useful life of a modern shopping centre put at half that.
Frankfurt’s MyZeil centre, which opened to such fanfare ten years ago, boasting a swooping glass roof and the longest elevator in Europe, has retail on eight floors and across 70,000 sqm. It was never fully let, and many of its premium names disappeared early, their expectations dashed. Its latest revamp, costing centre manager ECE €70m, will see it try to regain its original aspiration as a place to attract customers to eat, drink, get fit, watch movies and – hopefully – also do some shopping.
Given its several attempts to keep up with the pace since its opening, one can only imagine how much investors must have lost on the project.
Rebranding with its new gastro-concept Foodtopia might give a new fillip to Frankfurt’s flagship super-centre, but even here the centre saw the recent opening of a 300 sqm co-working facility on the mall’s second floor, presumably in a space which had previously sold expensive T-shirts.
The trend is clear. The office is arriving into the shopping centre as the only way to save such expensive real estate.
Westfield, now part of the centre management at Forum Steglitz, can tap into the experience of its sister companies around the world, faced with the same dilemmas. In San Francisco it launched its own brand, Bespoke, in its centre there with a 4,000 sqm space designed specifically as a retail-tech ecosystem supporting co-working, events, demos and pop-up shops.
It issues membership to corporates and startups. Many of its members work in industries such as payments, artificial intelligence, virtual reality, e-commerce and retail analytics – members who are actively looking to improve the retail landscape. It’s been a big success.
The key ingredients are community-based ecosystems, partnerships with retail-tech startups and corporates, and really using the retail environment for product testing.
The shortage of office space looming in Germany where people working for dynamic companies might want to work – and Berlin is very definitely such a place – will inevitably see many more retail candidates lining up to embrace a more hybrid tenant mix. It offers exciting new perspectives.
