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RETAIL MARKET: Future of shopping centre development by Katarína Brydone

“Looking at the Czech economy, we can see growth nowadays. Low unemployment rate, salary increase, retail spend up, etc. It should be a great time for the development of shopping centres, don´t you think?”, opened Mrs. Brydone during her discussion.

(article based on notes from the discussion on Top Trends in Real Estate held at AmCham on 31 January 2017)

However, after long years of rapid development which started in the 1990s and continued through the following decade, the development boom slowed down with the crisis in 2009 and then came to an end in 2011, which was the first year in which not a single new large retail centre was opened.

At the moment, we have more than 2,3 million square metres of large-scale shopping centres which are made up of some 120 shopping centres. More than half of those, are older than 10 year, which creates a strong case for their repositioning or redesign.

This trend varies city by city. In some cities, such as Prague, it´s still economically reasonable to build new retail centres or extend the existing ones because there is still a reasonable retail density in respect to purchasing power. Other cities are more saturated and one has to be careful when considering new development. Saturation is not a tragedy for the market, it is a natural development of a mature market. The shopping centre owners have to work with their centres and monitor what is working for the customer and how is the customer behaviour changing. The development always starts in large cities and as those became more saturated, it is spilling out to smaller. This is in line of the current trend with new shopping centres scheduling to open in smaller towns this year, such as Jablonec nad Nisou.

“What is also changing nowadays is the shoppers’ preference of the location, as customers are no longer willing to travel more than 15 minutes until they reach their shopping destination. Location is what matters. This trend supports development or extension in centrally located sites, as well as local centres, and support case of new development in smaller cities”, added Mrs. Brydone.  On the other hand, we also see a growing importance of comfort and having everything under one roof for shoppers. This trends has been recognised by owners of large dominant centres.

When to reposition the shopping centre?

“There is no one answer to this. There are many factors that influence this decision, such as changes in consumer behaviour, competition, location of the centre, SC life cycle, occupational market and also type of the owner. The decision is definitely complex. However, if we are to generalise than we can say that centres that are 10 years old should probably plan to have at least facelift of common areas and change of some technologies, as some parts become obsolete. Owners of shopping centres should not wait until the footfall and turnovers starts to drop significantly, but to closely monitor the performance of the centre and consider remodelling when the centre reaches maturity, hence footfall is stable, turnovers are not growing anymore and it operates under favourable economic environment. ”, said Mrs. Brydone.

Shopping centres vs. E-commerce

It is true that e-commerce has the most dynamic growth, however we have to see it as an, alternative to  shopping in shopping centre. We are moving away from just buying of what we need to having an experience. Therefore, shopping centres have added value.

What are the latest retail trends?

• Diversification – Among the biggest reconstruction projects of 2017 is the enlargement of Prague’s Centrum Chodov by additional 40,000 square meters.  What is this shopping centre known for? Thanks to its big fashion shows, special brands, free stylist services, fashion corner. Chodov is proudly claiming: “We are the fashion destination for you.”
• Common Areas / Leisure and Entertainment – In other words, quality time spent. For example, men, husbands, boyfriends usually don’t want to spend their time in a shopping centre. One solution could be a gentleman´s area or a relax zone for men where they can watch football and have a coffee while their wives are shopping fiercely. As for families, children's corners and relax rooms, children’s toilets, breast feeding rooms for mums are becoming a standard.
• Food and Beverages– In a shopping centre we don’t want to just buy trousers, we want to have a good time, to get our kids to play and have an excellent lunch or dinner. That´s why we want to try out new special food and be surprised.
• Access and Parking – Meaning a clear access. You don’t want to get lost.
• Centre Management and Leasing – To have the right centre manager and leasing team is hugely important. To actually successfully realize repositioning is very hard and complex task. We are talking about ripping of floors, ceilings, changing vertical communication, closing certain parts of centres, etc while the centre still has to remain operational and its customers not discourage to shop there. This is easier said than done. The competent and proactive manager and leasing team is a key for a successful repositioning/redevelopment.

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