Retailers and shopping centre operators are starting to adapt their business models to the changing consumer behaviour. For now, it seems that retailers that are able to create a true omnichannel approach are outperforming their competitors. Walter Wolfler, Senior Director, Head of Retail Austria & CEE at CBRE talked to Property Forum about the future of retail.
Walter Wolfler will be the moderator of the retail panel at the upcoming CEE Property Forum 2018 in Vienna on 20 September.
What are the top three trends driving the CEE retail market in 2018?
Retail in CEE countries benefits from the growth in retail spending which has been substantially higher than the one in Western European in H1 2018 and should stay ahead of it until 2022. The yields for retail real estate have reached their historical low in almost all of the markets. Nevertheless, retailers and shopping centre operators are starting to adapt their business models to the changing consumer behaviour.
How are retailers responding to the growing popularity of e-commerce? Do you expect the downsizing of physical stores to become a common practice?
It seems that retailers that are able to create a true omnichannel approach are outperforming their competitors. This does not necessarily result in the downsizing of physical stores. Several brands are increasing their surfaces in order to deliver the maximal customer experience to their shoppers and to have space for the fulfilment of their omnichannel strategy (e.g. facilities for click & collect). Many retailers report a positive “halo” effect between a physical store and the online sales adjacent to that store.
Walter Wolfler
Senior Director, Head of Retail Austria & CEE
CBRE
What are some of the innovations (new formats, new experiences, etc.) shopping centres in the region are introducing in order to stay in the race?
The easier online shopping gets, the more shopping centre owners are challenged to provide “experience shopping” to their customers. In general, they are creating places where you cannot only shop (although the best possible tenant mix stays mandatory), but also socialize with friends, entertain yourself and benefit from a variety of services. Thus the space allocated to food & beverage, children playgrounds, attraction points, health services, public services, co-working spaces, etc. is growing. It has to be noted that, in particular for smaller cities, the concept of retail parks (if well developed) is still very popular among retailers, customers and investors.
Are there still opportunities for retail developers in CEE? Which are the less saturated markets where there is room for new schemes? Are there markets where only expansions and renovations are in the pipeline?
Looking at the retail density, most of the CEE countries are reaching substantial values considering their purchasing power. While e.g. in Austria and in the Czech Republic the development is currently limited, other countries are still active. The highest development is in Romania, which has the lowest retail density so far, and also in Poland. The Czech Republic is a typical example of a saturated market, where we monitor mainly expansions of existing schemes and increased importance of refurbishment and repositioning
Which CEE cities and which market segments can see the highest rental growth over the next 12 months?
In H1 2018 we saw the highest annual rental growth in Bucharest, Budapest and Prague. These markets are supposed to have rental growth in the upcoming 12 months as well, however at a slower pace.
