It comes as no surprise that consumer trends and habits keep changing, especially after the acceleration in digital transformation brought by the pandemic. Therefore, shopping centres and the retail sector should adapt and consider new suitable strategies. Evolution always takes time, so the moment to start thinking about the future is now.
Innovation and forward-thinking always imply taking contributions from different actors, which is why we have invited Joost Koomen, Secretary General of the European Council of Shopping Places (ECSP), to share his perspective on the future of our sector.
Which are the real challenges the commercial real estate industry is facing?
Well, we should distinguish between the more short-term immediate and mid-term longer term. It’s quite obvious that short-term challenges are linked to the epidemic. When shops are closing, when offices are closed, rents cannot be paid and this puts an immediate financial pressure, I would say, on the entire commercial ecosystem.
In the mid- and longer term, there’s a clear challenge of sustainability and, specifically, climate change and the impact that it’s having on society. We should pay attention to increasingly strict environmental standards on buildings, which is a huge challenge. There are a lot of things already being done by the industry, but because of the standards, the legal terms will become more strict and tougher for some buildings that are high consumers of energy.
“The increasingly strict environmental standards on buildings are a huge challenge”
I think there are also some more behavioural demographic challenges. Increasingly, shopping is done online or via click and collect, or via omnichannel ways. Of course, the challenge is how to adapt best to these new ways of consuming. These are not new challenges, but again the pandemic has accelerated them and they are huge opportunities to improve business models, to gain new customers, to get access to a new type of customer.
Regarding these challenges, how is digital transformation helping to adapt to new commercial real estate business models?
There are many aspects to consider. Digital transformation clearly involves how to adapt your commercial properties, and specifically when it comes to retail, becoming more welcoming of omnichannel strategies.
For example, if we take shopping centres, there’s sufficient possibility to allow for click and collect, but it is important to optimize the clicks and bricks, so that not only you can collect the order in the store, but also you can track it at a parking lot, with low using of a utility, such as lockers where goods can be delivered. We should focus on how to integrate those alternatives, or how to optimize or improve existing properties to meet those demands.
I think a lease model involves using the digital shopping centre basically to recreate it online and offer the same shopping experience, which is not a very interesting business model. It is crucially important for the commercial sector to adapt, not just a bit, but to try to be ahead of the curve and anticipate these trends and integrate them.
“the commercial sector must adapt and be ahead of the curve to anticipate trends”
How do you imagine the evolution of the shopping centre industry will be?
Shopping centres, as everything, have to evolve along with some of the trends around digitization, sustainability, and how to make some shopping centre buildings more sustainable. The shopping centre industry in that sense, has already anticipated and implemented a lot of these demographics, environmental, commercial, and digital changes for a couple of years now. In fact, from a sustainability point of view, shopping centres or retail efforts have a four times higher renovation rate than other real estate sectors.
Given all the new requirements that are coming and the need to become more sustainable, become more energy efficient, we definitely have a head start because evolving is already in the DNA of this sector. You know you have to renovate in order to improve.
And I think the last thing is that there will be several multi-use hybrid shopping malls, which will include, in addition to bars and restaurants, other functions, such as offices. I think travel/tourism can also play an important role in this respect, certainly in Europe, and shopping malls will become much more than just places where we can shop and eat.
How important are sustainability, social commitment and mobility?
I cannot stress enough how helpful sustainability will be for us as an industry if the building environment meets that challenge. Of course, it should be in very close collaboration with our investors, the banks, as well as the local authorities of the places where we are located because they play a very important role there too.
“The path towards sustainability also involves investors and local authorities”
Social commitment is also important because property owners make an impact directly and indirectly at a local level. For instance, most entry level jobs provide jobs for those segments of the population which are more fragile. And they are part of a little community; we have seen last year that if you close down all shops, there is an enormous negative impact for the local community. This is closely linked to social mobility, since the sector generates direct and indirect jobs. It is an essential industry for people to start in the labour market and from there begin their careers.
What role does the European Council have and how does it contribute to shopping centres?
There are a number of ways in which the European Council of Shopping Places can contribute to the sector. There’s an important networking role, to gather market players and operators all over Europe. This implies meeting with peers from everywhere to exchange views, to learn what’s happening in other countries, to see differences and similarities, which always brings added value.
Secondly, it is noteworthy that we have an organization that can also represent, advocate, communicate on behalf of the industry at the European level, specifically at the Brussels EU level. Many important initiatives and legislations arise there, such as the Green Deal and many new regulations with regard to climate change, funding projects to recover from the COVID pandemic. It is important to make sure that our voices are heard, that our concerns and suggestions are taken into account.
“At the European Council of Shopping Places, we support the industry and we speak up as much as we can”
There is also a counselling role where we can provide guides and documentation on legal issues, and security issues. We also bring together all the information in one place, and then provide a set of tools that our members can use in their daily business life.
In addition to representing the sector as such at European institutions, it’s also very important to be represented with important stakeholders in our value chain, such as retailers, other real estate actors, banks, because they make relevant decisions for the industry as well.
“It is essential to be in touch with other players of the industry, so we can collaborate and join forces on specific projects”
To learn more about you can watch the whole interview in the video.