GRICEE Retail - Still going strong, but for how long?
Retail real estate in CEE is bucking the trend elsewhere, with growth expected over the next five years.
December 12, 2018Real Estate
GRI Club members gathered in Budapest on 6 December to discuss the strength of the retail market in CEE compared to elsewhere. No one present in the room could foresee any slowdown in the current growth rate of the retail sector across CEE, based on the economic fundamentals of rising salaries and large increases in disposable income. There continues to be strong demand from tenants for retail space in under-construction projects and, compared to Western Europe, plenty of room to raise leases in the future.
Online shopping vs shopping malls
In the view of investors, the rise in online shopping has not impeded the growth in retail real estate across the region: in fact, both e-commerce and retail real estate have been growing in parallel.
Why this should be in CEE - particularly when contrasted with the present situation of retail in the US, where there have been a massive number of closures - was carefully considered. Participants noted several factors that are idiosyncratic to CEE, including the slow take-up of e-commerce, for various reasons, and also the general popularity and cultural importance of shopping malls, especially for young people. However, it was noted that the way we all think about retail is changing, and that shopping malls are, for example, now selling more of an experience and entertainment than goods.
Where and how to develop retail
Regional differences were explored - from Hungary, through to Poland and Austria - and which cities presented the best opportunities for real estate development, and why.
There were lessons, also, that were drawn from retail experiences elsewhere, and participants discussed how those could be applied to CEE. Ideas were exchanged on what elements make for a successful shopping mall in CEE, including architecture, food courts and attractive pedestrian areas. And there were words of caution, too, on certain matters, including how best to manage retail developments and what to watch out for with franchisees.
What about logistics, compared to retail?
It was agreed that for developers, it was very difficult to keep ahead of leading logistic companies like Amazon, because they changed their model so frequently. One suggestion was that in the future, a project combining both logistics and retail might work.
Future in five years’ time
It was acknowledged that there were mixed signals coming from the retail sector, when looked at globally, and that it was important to continue sharing different experiences and expectations in club meetings. Although strong in CEE, retail was still not a sector where you could predict and plan for what was coming in five years’ time.
Online shopping vs shopping malls
In the view of investors, the rise in online shopping has not impeded the growth in retail real estate across the region: in fact, both e-commerce and retail real estate have been growing in parallel.
Why this should be in CEE - particularly when contrasted with the present situation of retail in the US, where there have been a massive number of closures - was carefully considered. Participants noted several factors that are idiosyncratic to CEE, including the slow take-up of e-commerce, for various reasons, and also the general popularity and cultural importance of shopping malls, especially for young people. However, it was noted that the way we all think about retail is changing, and that shopping malls are, for example, now selling more of an experience and entertainment than goods.
Where and how to develop retail
Regional differences were explored - from Hungary, through to Poland and Austria - and which cities presented the best opportunities for real estate development, and why.
There were lessons, also, that were drawn from retail experiences elsewhere, and participants discussed how those could be applied to CEE. Ideas were exchanged on what elements make for a successful shopping mall in CEE, including architecture, food courts and attractive pedestrian areas. And there were words of caution, too, on certain matters, including how best to manage retail developments and what to watch out for with franchisees.
What about logistics, compared to retail?
It was agreed that for developers, it was very difficult to keep ahead of leading logistic companies like Amazon, because they changed their model so frequently. One suggestion was that in the future, a project combining both logistics and retail might work.
Future in five years’ time
It was acknowledged that there were mixed signals coming from the retail sector, when looked at globally, and that it was important to continue sharing different experiences and expectations in club meetings. Although strong in CEE, retail was still not a sector where you could predict and plan for what was coming in five years’ time.
