Colliers Blog - It is the right time for shopping centres to find and strengthen their identity
Whether all shopping centres will survive the pandemic or not is a million-dollar question and, of course, quite tricky.
The Covid-19 pandemic and the restrictions imposed came quickly and unexpectedly, turning many lives and businesses upside down, also showing weaknesses in the operation of domestic shopping centres. None of them had a Plan B, let alone a Plan C, to deal with the situation where a lot of vacant commercial spaces are appearing on the market when demand is falling sharply.
It is worth recalling that, just before the pandemic, in 2019 and 2020, several large-scale projects were completed (Akropolis, SAGA, VIA Jurmala Outlet opening, Alfa and Origo expansion, SC Domina has also announced its development plans). At that time, thousands of square metres of new retail space ‘appeared’ on the market, thus turning into a tenant market. Before that, brands were queueing in line, waiting for vacant space for their new shops. By expanding and building of new shopping centres such an opportunity arose, almost all vacant square meters in shopping centres were filled. True, there were not many new players, brands that had wanted to expand seized the opportunity, but those who only conducted their market research and looked at opportunities, decided to wait and see what would happen.
However, Covid-19 came and highlighted the fact that shopping centres were not ready for the scenario when a lot of space would suddenly be vacated, no new concepts were prepared for them, and there were no potential tenants. The pandemic worked as a catalyst for change, accelerating all the processes that had already taken place and, sooner or later, manifested themselves (perhaps in a gentler way than now).
On the positive side, many malls have a personal approach to their tenants, and feedback is important to them. At the same time, each centre acts independently and, depending on the shopping centre’s communication style, many of which are similar, one can get a clear idea of whether or not another shopping centre is better than the other. Therefore, in the current situation, it would be more useful for everyone to agree on a common strategy than to communicate what is happening in the industry with their cooperation partners, society, and the state. Everyone is in the same boat and should work together to achieve the goal.
Shopping centres have formed a so-called coalition, trying to address the state regarding possible support—if not for themselves, then maybe for tenants—that would allow them to cover the rent. However, this has not helped for coming to a mutual agreement, so a movement of ‘white flags’ has been launched with the aim of drawing attention to the issue of business survival. And the question of whether everyone will be able to survive the pandemic is really relevant.
Large top-tier shopping centres have always had lots of tenants willing to rent a retail space. Therefore, even during Covid-19, they basically have something to work with, and there are opportunities to change and relocate tenants. They still have demand for retail space. In turn, those shopping centres that have always fought for tenants, for better brands, are currently in an unenviable situation.
Based on previous experience, it can be said that those shopping centres that try to work with existing tenants as much as possible will survive. For example, some smaller shopping centres reacted very actively to change, communicated with tenants, granted discounts, initiated a conversation with the tenant, rather than waiting for a specific government decision. Thus, they hope to maintain friendly relations with cooperation partners in the future.
Those who have their own niche and focus on a specific segment will survive. For example, Spice's focus is on fashion—both existing and potential tenants and brands form a single product, providing specialisation.
What can be done?
Unfortunately, there is no one recipe for everyone, but we must definitely take into account that now it is a tenant’s market. Thus, first of all, as it has already been emphasised, shopping centres need to cooperate, and communicate with their tenants in a proactive manner; tenants want to be heard—what they need, how they can be supported, and compromises must be sought.
Secondly, it is the right time to decide what exactly to focus on, what niche to operate in when Covid-19 ends, to plan accordingly and, if possible, to start implementing changes now. It may not feel right in the current situation, but this is a great time for change—it is possible to improve the centre, even by relocating tenants. It is necessary to analyse the possibilities, find a niche, understand what kind of customers the shopping centre wants to attract after the pandemic.
Thirdly, it is necessary to understand what the outstanding feature of a particular shopping centre is or what the unique features are that others do not have. These could be tenants or services that are not offered anywhere else. For example, next to the Saga shopping centre, a wake park and other sports attractions are slated to be launched.
Fourthly, although I suggest shopping centre owners step into the shoes of the tenants, at the same time we should not get too pessimistic, continue talking to new companies that are not present in this market yet. Don’t give up, don’t think that no one would want to make their business here. On the contrary—it is necessary to have a positive mind-set, with a vision for the future.
And fifthly, it is important for shopping centres to continue communicating with each other, because by joining efforts, it is more likely a positive result will be achieved in these difficult times.