Those who are still investing prefer to invest through joint ventures or club deals rather than through the ‘fund’ model that was so popular before the crisis. This is because investors want fewer partners and more control with their investments.

According to Anne Kavanagh, Global Head of Asset Management at AXA Real Estate, the fund model hasn’t recovered from the crisis.  She added: “Retail requirements are changing and shrinking in some cities, while expanding into other areas. We are looking at those trends and being careful in our decision making.”

The important point is where retailers want to be. The panel, moderated by real estate researcher and writer, Andrea Carpenter, pointed out that Investment follows retail trends, and investors’ money goes to towns and cities where there is a demand but with the growth of ecommerce, the number of cities where retailers want to be located in is fewer. Despite this, Kavanagh says that AXA is planning to boost its retail investment by 50% over the next year.

Investors are taking a much more active role in selecting their investments, according to Dr Frank Billand, board member of Union Invest, Germany.  “Interior design of assets will have to change to reflect changing consumer behaviour.  All our operators and managers play an active role in managing our assets and have responsibility to manage the change.”

But retail real estate is still a very good investment, according to Billand.  “When my investors question such a large single investment, I say: ‘Why? There are 80 tenants with that investment.”  His problem is finding the right product for such investments as development has slowed.

Matthias Boning, CEO of mfi management fur immobilien, agreed. He said: All investors are not only more careful but they have a higher level of knowledge to make the right decisions.”

For Eric Donnet, Managing Director and COO of AEW Europe, raising equity is difficult as investors are much more selective and opportunities that match that are fewer, particularly with new developments.

However, with fewer developments going ahead, the market is stabilising as there is no risk of oversupply, and for companies such as AXA Real Estate, this opens the opportunity for a strategic programme of refurbishment of existing shopping centres. Anne Kavanagh said: “We can invest equity in upgrading centres we own, confident in the fact that new developments won’t happen or have been shelved.”

The department store format was born out of the industrial revolution, the invention of steel-framed architecture and the rise of the middle class who could afford to shop in them.   Fast-forward 150 years, the birth of shopping centres and it’s not surprising their relevance is now being questioned.  However, experienced department store specialists consider this star could be rising again.

Speaking at a panel session on department stores at the ICSC Conference, John Scott, Head of International Business Development for Debenhams, the second largest department store company in the UK and with 67 stores across Europe and the Middle East, wants to double the number of stores outside the UK in the next five years, but says the format must change to meet changing consumer demands.

“The future is likely to be smaller, more flexible, convenient and embrace technology,” he said.

For Lauri Veijalainen, Development Director for Finland’s Stockmann, which has stores across Finland, the Baltics and Russia and turned over 2 billion Euros last year, downtown stand-alone stores work best.  “Convenient parking is a must,” he said, citing Russia’s chaotic traffic systems.

A relative newcomer to the department store industry is Turkey-based TKM.  Just 60 years’ old, TKM has 65 department stores.   Nusim Oral, director of TKM, said: “Department stores can no longer offer everything under one roof.   Our slogan was ‘Everything to everyone’.  Now it’s ‘Choose yourself’.  But it was the growing shopping centre industry in Turkey that gave impetus to the Turkish department store.

She said: “People want to mix and match brands to reflect their personalities. A department store fashion customer can understand a whole season’s fashion in one visit.”

Department stores are failing to reinvent themselves because of cost, says Debenham’s Scott. “We have spent most of our money in the UK in the last few years on renovation, and it’s paying off.”

Some say department stores must shake off their ‘middle aged’ image. Scott disputes this view.   “Our average customer is women aged 25-45 with children.   We are a mid market department store and she is the biggest spending customer out there.”

50% of Turkey’s population is under 25, and TKM is working on the 25-35 age range as they will be starting families and will be customers for longer – though Oral points out that the younger customers have more disposable income.

The unique selling point for department stores will always be exceptional customer service, according to Veijalainen – a concept which is talked about a lot, but which is more difficult for shopping centres to deliver with continuity.

Alexander Otto, one of Europe’s top real estate professionals, succeeds Marcus Wild, CEO at SES Spar European Shopping Centres who has led the organisation successfully for three years through the most challenging economic environment of the industry’s history.

Alexander Otto: “I am looking forward to this new challenge and am very honoured to succeed Marcus Wild who has done a great job as ICSC’s European chairman over the past three years.”

Otto defined the following major targets for ICSC during the next years: “We need to continue our efforts to turn ICSC into a truly international platform in order to meet the needs of a globalised industry. Transparency becomes more and more important. Defining standards for shopping centres and collecting und publishing data about the European shopping centre industry should therefore be a focus of ICSC’s research. Last but not least it is vital for the organisation to speak with “one voice” and to strengthen the cooperation with the EU.”

After nearly 12 years at the helm of ECE, Alexander Otto has built the company to be one of Europe’s most successful real estate businesses, continuing to grow despite the global financial turmoil. At the height of the crisis, the company not only fulfilled its financial obligations but started new investments and developments of around one billion Euros.

Mike Kercheval, ICSC President & CEO, welcomed the new Chair.   He said: “We are delighted that Alexander Otto is taking over the Chair for ICSC Europe. Members will benefit from his unparalleled knowledge which will build on the achievements of Marcus Wild as ICSC widens its reach across Europe and globally.”

Marcus Wild added: “The way we use technology and the nature of knowledge in general is changing but networking remains a key part of the equation. Different people are using technology to do new, truly exciting things. And networking helps people connect to productivity, connect to innovation, connect to entertainment, and, most importantly, connect with each other. I am sure Alexander’s dynamic leadership and passion will succeed in creating a bright, advanced and networked future for ICSC and its members.”

There are genuine signs of strength in retail trade across parts of Europe, but the shopping centre industry continues to experience turbulent times. The annual ICSC European Conference, in Berlin from 18-20 April, is where the industry’s senior players come together to plot the road ahead.

According to Dr David Bosshart, CEO of Zurich-based Gottlieb Duttweiler Institute who is speaking at the conference, one of the few things that truly work in the global economy are shopping malls.  He said: “Shopping malls all over the world support and stabilise the economy. They have an underestimated economic impact.”

Over the last decade, shopping developments have expanded as international retailers demanded more space. Now with some reducing their shop footprint due to Internet sales, ‘Is Big still Beautiful?’  This year’s conference will look at whether such formats are sustainable and can smart cities accommodate big retail formats.  Department stores are also seeing a resurgence and the conference will consider their expansion strategies and talk to representatives of some of Europe’s biggest.

Continued financial investment is essential for the industry’s future – but where will it come from? Anna Kavanagh, Global Head of Asset Management of AXA Real Estate UK and Frank Billand of Union Investment, Germany are just two of the panel speakers who will debate the issues.

To kick start the conference, Alexander Otto, Marcus Wild and Gerard Groener will be on this year’s CEO Panel – which has come to be one of the conference’s most anticipated sessions.

According to Patrick Delcol, Chair of the ICSC 2012 European Conference Planning Committee and Country Head of Poland DTZ, a fragmented industry approach will delay retail recovery. “The retail industry must play its part in the Eurozone recovery, and that means working together in the same room, in the same city at the same time.”

Shopping, Consuming, Seduction – Where Do We Go in an Age of Less?

Dr David Bosshart is the CEO of Zurich-based Gottlieb Duttweiler Institute, which conducts scientific social and economic research. His area of expertise is in the future of consumption and social change and he will speak at this year’s ICSC European Conference in Berlin.

Leading up to the conference, ICSC asked Dr Bosshart to give his opinion on the industry’s biggest issues:

How is retail responding to the current economic downturn?

We witness a shift from a focus on money to a focus on creativity. Winning retailers will focus on creativity: No more how much a consumer spends is the ultimate measure, but how well he spends. Edgy creativity in much more austere times means a reward for attention, attraction, and caring. And those customers will come back.

What is the future for retailers – on the high street, in shopping centres or the internet?

Customers these days no longer make any distinction of channels, either it suits their needs and expectations, or not. The biggest challenge is a cultural one: can we change the mindset of our staff, even if we have offline stores, mobile communication, web sites, social commerce, and call centres at the same time?

Are retailers slow in responding to change?

I wouldn’t say so. The gap between those who cope and those who don’t – or too late only – is growing. But this is always the case in hard times. We will certainly see more consolidation for all businesses that don’t get a more personal note.

What are the new opportunities for retail?

Retail is still the most fascinating industry of hospitality, deep joy, and easy pleasure at the same time. Shopping became the greatest leisure activity all over the world over the last years – even men are learning to shop! People like to buy, to talk about stuff, to communicate, to collect, to share, to swap. This offers tremendous new opportunities. Only the blind will not get it.

What is your message for the Shopping centre industry?

One of the few things that truly work in the global economy are shopping malls. Why? First, technically speaking, shopping malls all over the world support and stabilise the economy. They have an underestimated economic impact. Second, and more important even, it is the hardest form of soft power: It is about the true power of seduction in the coming years. People like good seduction. It’s a love affair.

Cyriac Roeding, Co-Founder and Chief Executive of Shopkick, USA is also speaking at the conference.

Shopkick is the first mobile app that gives rewards and offers simply for walking into stores. In Cyriac’s opinion, it’s imperative that the retail industry participates in emerging engagement channels.

“Shoppers are becoming savvier. Brick and mortar retailers need to implement programmes that add value to the in-store experience or they risk losing customers to online marketplaces,” he said.

He thinks that rather than internet shopping being a threat, it presents a huge opportunity for physical retailers if harnessed correctly through smartphones.

“Once we had a few retailers on-board to test our solution, and had early results showing Shopkick delivers the foot traffic we promise, signing on both brand and retail partners has accelerated.”

Cyriac anticipates more change in retail in the next five years than in the past 100. “Retailers and businesses will continue to focus on driving in-store purchase, because the No. 1 concern for retailers is foot traffic and margin of in-store sales exceeds that of goods sold online.”

Mobile will be the No. 1 marketing medium for physical retailers, he says, “The cell phone is the only interactive medium consumers carry with them in a non-interactive environment, like a store.”

An ICSC study published in 2008 estimated nearly a quarter of retail sales in Europe occurred in shopping centres, and shopping centres employed 4 million European workers – a fifth of retail employment.  Since then shopping centres have multiplied and with that their impact on European economies.

Shopping developments expanded as international retailers demanded more space. Now some retailers are reducing their shop footprint due to increased internet sales, producing unexpected opportunities for shopping centres such as ‘click and collect’. This year’s conference theme is: ‘Is Big Beautiful’? Are such formats sustainable and can smart cities accommodate big retail formats?

According to Patrick Delcol, Chair of the ICSC 2012 European Conference Planning Committee and Country Head of Poland DTZ, a fragmented industry approach will delay retail recovery.   “Eurozone Countries are warning against the ‘each man for himself’ approach,” he said. “The Eurozone must survive. As a cross-border industry, retail is important for employment, investment and boosts local economies.”

Alexander Otto, Marcus Wild and Gerard Groener are amongst speakers debating the issues.  Others include David Henry, President of Kimco Realty Corporation, Mike Kercheval, President and CEO of ICSC and Anne Kavanagh, CEO of AXA France.

Delcol added: “The retail industry must play its part in the Eurozone recovery, and that means working together in the same room, in the same city at the same time.”

Retail is fighting back.  Over 100 retail brands and counting are now confirmed at this year’s ICSC Retail Connections on 28 March at The Business Design Centre, London, and more big names are registering every week.

The number of developers taking stands is also increasing.  31 developers have taken stands, more than ever before.   So many, that ICSC has had to increase the floorspace and add two more networking areas.

However, ICSC is determined that the event stays self-contained and focused.

According to Klaus Striebich, Managing Director of Leasing at ECE Projektmanagement and Chair of ICSC European Leasing Group, which spearheads the event, the speed at which the event has grown, and the consistent numbers of large retailers attending, shows the effectiveness of the event. “The sole objective of the event is to meet and do deals. Since it started it’s saved my team thousands in both travel costs and time,” he said.

This year there will be a special country stand for Turkey.  The Turkish Council of Shopping Centres is bringing a trade mission to the event.   Turkey has been identified as one of Europe’s rising stars and according to reports, Istanbul tops the ranking for new investment. Although across Turkey, growth is down from a high of around 7% last year, a rise is anticipated by 2013.   Other countries are also considering taking space at the event as they recognise the opportunity of providing a shop front to their country.

For more information on ICSC Retail Connections, www.icsc.org/2012LRC

This admission from retailers is welcome news for shopping centre investors and asset managers who have felt increasingly threatened by traditional retailers expanding on-line. Retailers are also boosting ‘click and collect’ facilities as they recognise that on-line shoppers often prefer to collect from a store, frequently adding to their purchases when they do so. Far from being uncertain, these findings show the shopping centre industry’s future holds significant new opportunities.

Jon Bjornsson, CEO of Danish department store chain, Magasin, which is significantly  expanding its multi-channel offer, said costs saved on rent were absorbed by significantly higher transport and goods returns costs incurred by online retailing.   “Around 2% of goods bought in our shops are returned, but that can rise to 25% with goods bought on-line, especially for online clothing retailers where customers may order two or even three sizes, sending back the ones that don’t fit,” he said.

However, a multi-channel retail strategy is essential for retailers whose customers expect to see their favourite brand or retailer everywhere they look, he added.

 There are other issues for retailers expanding their offer from traditional stores to on-line, including a higher expectation from customers. From changing stock seasonally, customers now expect new products five or six times a year.   Magasin’s Bjornsson added: “Customers expect the selection in an on-line shop to change faster than in the physical store.”

 However, many retailers are still only paying lip-service to multi-channel retailing, according to ICSC seminar speaker Dr Jonathan Reynolds, of Oxford Institute of Retail Management in the UK.   “69% of retailers claim to have a multi-channel vision and strategy, but only 29% of them have the technological and infrastructure capability to roll it out,” he said.

 ICSC Conference Chair, Kathrine Heiberg, CEO of specialist refurbishment company, Reteam, said: “Shopping centre industry professionals have spent the last few years in a state of uncertainty, a few even called the end of large scale retail development as they predicted a big consumer move online.   It is now clear that such a pessimistic attitude was way off the mark.   Far from facing the end,  shopping centres professionals are now looking at the huge opportunities that exist to make shopping centres real destinations, places for people and communities.   The digital dawn has opened up far, far more opportunities than it has restricted growth.”

Turnover in these properties over the first 9 months of 2011 grew by 6.9% compared to the same period in 2010, and growth in the best properties reached 10%.

Speaking at the International Council of Shopping Centers (ICSC) Baltic States Retail Real Estate Conference, Marcis Budlevskis, Lease and Business Development Director at Linstow Center Management, and chair of the ICSC Baltic National Committee, said: “The trend is clear, demand is there and the numbers of visitors to the region is increasing, boosting shopping centre footfall further.  If the Baltics only had to worry about itself then I would be very confident.”

Emerging from the economic downturn, The Baltic States is seeing manufacturing growth up on 2009 although it has leveled off recently and the region is well aware that it is not immune to what is happening elsewhere across Europe.

Tõnu Palm, Chief-Economist of Nordea Bank Estonia, also speaking at the conference, said that wages are increasing at a good speed, though not as fast as inflation. He predicted that with lower external price pressures inflation is expected to decelerate in the Baltics at the fall.

“The Baltics have undergone severe adjustment (including cost cutting), during the past crisis. This means they are better prepared to weather another storm or crisis,” he said. “The Baltics remain an attractive investment destination and are hence increasingly benefiting from Scandinavian interest to do business in the region.”

Retailers speaking at the conference confirmed their confidence in the area.   Estonian fashion retailer The Baltika group operates four retail concepts: Monton, Mosaic, Baltman and Ivo Nikkolo across the Baltics, Russia and the Ukraine, and is now seeking to expand further into Europe.  Other retailers are keen to move into The Baltics, where they see untapped potential.  Dutch menswear retailer, Suitsupply, which has stores across the world including China and the United States, has stores in Riga and Vilnius and sees the potential for more. Aurora Fashion operates retail concepts Karen Millen, Oasis, Warehouse and Coast which collectively have 1639 stores in 49 countries.   Like Suitsupply, Aurora Fashion is also seeking to move into the Baltics.

This as further proof of the region’s attractiveness, says Linstow’s Marcis Budlevskis: “We have a strong culture of local retailers who know their customer best and add flavor to a vibrant shopping environment.  Successful Baltic retailers are looking further afield for expansion, but they must accept that international retailers also see Baltics as an attractive market and are keen to seize a market share for themselves. The retail real estate industry here is also very flexible operating with short-term lease agreements within a culture of flexible employment, which allows frequent tenant changes improving tenant mix in most shopping centers. This makes for a more diverse shopping environment which can only be good for the region’s longer term economy.”

Annual GDP growth in 2011 across the Baltics is predicted at 3.5% and consumer confidence is rising with one of the region’s major shopping centre owners and operators, Linstow Center Management, reporting uninterrupted turnover growth over the last 14 months in all 6 Baltic properties it manages.

Turnover in these properties over the first 9 months of 2011 grew by 6.9% compared to the same period in 2010, and growth in the best properties reached 10%.

Speaking at the International Council of Shopping Centers (ICSC) Baltic States Retail Real Estate Conference, Marcis Budlevskis, Lease and Business Development Director at Linstow Center Management, and chair of the ICSC Baltic National Committee, said: “The trend is clear, demand is there and the numbers of visitors to the region is increasing, boosting shopping centre footfall further.  If the Baltics only had to worry about itself then I would be very confident.”

Emerging from the economic downturn, The Baltic States is seeing manufacturing growth up on 2009 although it has leveled off recently and the region is well aware that it is not immune to what is happening elsewhere across Europe.

Tõnu Palm, Chief-Economist of Nordea Bank Estonia, also speaking at the conference, said that wages are increasing at a good speed, though not as fast as inflation. He predicted that with lower external price pressures inflation is expected to decelerate in the Baltics at the fall.

“The Baltics have undergone severe adjustment (including cost cutting), during the past crisis. This means they are better prepared to weather another storm or crisis,” he said. “The Baltics remain an attractive investment destination and are hence increasingly benefiting from Scandinavian interest to do business in the region.”

Retailers speaking at the conference confirmed their confidence in the area.   Estonian fashion retailer The Baltika group operates four retail concepts: Monton, Mosaic, Baltman and Ivo Nikkolo across the Baltics, Russia and the Ukraine, and is now seeking to expand further into Europe.  Other retailers are keen to move into The Baltics, where they see untapped potential.  Dutch menswear retailer, Suitsupply, which has stores across the world including China and the United States, has stores in Riga and Vilnius and sees the potential for more. Aurora Fashion operates retail concepts Karen Millen, Oasis, Warehouse and Coast which collectively have 1639 stores in 49 countries.   Like Suitsupply, Aurora Fashion is also seeking to move into the Baltics.

This as further proof of the region’s attractiveness, says Linstow’s Marcis Budlevskis: “We have a strong culture of local retailers who know their customer best and add flavor to a vibrant shopping environment.  Successful Baltic retailers are looking further afield for expansion, but they must accept that international retailers also see Baltics as an attractive market and are keen to seize a market share for themselves. The retail real estate industry here is also very flexible operating with short-term lease agreements within a culture of flexible employment, which allows frequent tenant changes improving tenant mix in most shopping centers. This makes for a more diverse shopping environment which can only be good for the region’s longer term economy.”

Changing consumer behaviour favours Outlet Shopping

Traditional retail continues to be challenging thanks to volatile European economies, but leading European outlet development company, Neinver, reported a 7 per cent increase in visits to its centres this year resulting in a 15% sales uplift, delegates heard at this year’s International Council of Shopping Centres (ICSC) European Outlet Conference in Milan.

Consumers are not ready to give up the increasingly popular pastime of shopping, according to Neinver’s Eduardo Ceballos, who spoke at the conference, but they also don’t want to go to multiple places to shop.

He said: “Outlets deliver on both these accounts, as well as offering the lowest prices on goods.”

Two decades of expansion across Europe has delivered 190 factory outlet centres across the region serving 70% of the European population, and although some markets, such as the UK and Italy are considered to be mature with limited growth potential, significant new development opportunities exist in Germany and Central and Eastern Europe, the conference heard.

Holding back development in Germany, which currently has just six outlets serving a population of over 80 million people, is the country’s restrictive planning regime, which requires developers to secure both federal and regional planning permissions, often a long process with no guarantee of success.  It is estimated that there is potential for a further 20- 30 outlets in the country and currently around plans for around 15 are being considered. However, in France, recent changes in the previously tough planning system have resulted in the success rate for planning applications rising from 45% to 74% since 2008, which should encourage a retail development boost to the country’s struggling economy.

Brendan O’Reilly, Managing Director of Fashion House Group, warned that a the lack of debt finance is hindering growth for outlet developers as well as traditional retail developers, but with growing institutional recognition for the sector when brands seek funding to expand, commercial lenders are demanding that they have an outlet strategy to add a further distribution channel as well as to liquidate old stock.

However, with global investors looking towards Western Europe rather than what it sees as a currently more risky Central and Eastern Europe, the most likely country for outlet investment will be Germany.

The ICSC conference is the largest dedicated outlet conference in Europe with delegate numbers continuing to grow.

Chair of this year’s ICSC European Outlet Conference, Iestyn Roberts of Freeport Retail, said: “The continuing economic downturn favours outlet shopping over traditional retail as outlets continue to make money, but as the point of differentiation with the high street narrows the outlet sector must continue to innovate and attract new shoppers to maintain its role as a great visitor destination.”

He added: “Outlets have always been more innovative than traditional full-price shopping malls and where outlets lead, others will follow.”