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The Digital Revolution in Real Estate

Insight Summit — CEEQA@Mipim, 11th March 2014

Online shopping the death of bricks & mortar retail?

6L1A0891Online retail is in the foothills of its evolution and pioneering stages of development, it is virtually impossible to imagine what it will look like 20, 30, 100 years in the same way the same way we couldn’t imagine email, the internet and smart phones 30 years ago − but one thing is certain, it will need exponentially more distribution centres, and different kinds of distribution centres and storage centres to those we know today, while traditional shopping centres are going to need to adapt significantly, at significant investment outlay, to keep pace, or to survive.

So said Amazon’s EMEA Real Estate head Raimund Paetzmann, and so said a panel of international commercial real estate and retail experts at the 2014 CEEQA@Mipim Insight Summit in Cannes.


KEY NOTE: Raimund Paetzmann, Director EMEA Real Estate, Amazon.

PANEL 1 – THE TENANT PICTURE: Alan Colquhoun, Head of CEE, DTZ; Gerhard Dunstheimer, Deputy CEO, ECE Projektmanagment; Hadley Dean, (MRICS) Chief Executive Officer, EPP: Otis Spencer, President, Peakside Polonia Management; Robert Dobrzycki, Chief Executive Officer Europe, Panattoni Europe.

Fast & loose

Online retail is expanding in developed economies more rapidly than the current stock of distribution space can handle, let along the right kind of distribution space for efficient distribution to major urban conurbations which are the principal source of demand. Including in Central & Eastern Europe where current take-up is a fraction of take-up in leading markets like USA and UK.

6L1A1057“Amazon is experiencing customer dissatisfaction rates of more than 50%, not because our prices are too high but because of the efficiency of current distribution channels,” claimed Paetzmann, foreseeing that in the future distribution centres will be closer to city centres and are likely to adopt a vertical format to maximise space rental efficiency. They will also need greater employee parking and service facilities than the standard storage and distribution centres of today offer, which adds up to a major opportunity for warehouse developers today and into the future.

PANEL 2 – THE MONEY PICTURE: Eduard Zehetner, CEO, Immofinanz; James Brown, Head of EMEA Research & Consulting, JLL; Joseph Ghazal, Managing Director & Head of Capital Deployment for Europe, ProLogis: Michael Kroeger, Head of International Real Estate Finance, Helaba; Mike Rodda, Head of EMEA Cross Border Retail Investment, Cushman & Wakefield; Thierry Leleu, Head of Funds Management, VALAD Europe.

MODERATOR: Agnieszka Stankiewicz, Partner, Greenberg Truareg.

Footfall rents the future?

But the story is more complicated for traditional retail. Unless it can find ways of dovetailing with the growth of online retail in areas like click&collect, where centre revenue lost to ‘show-rooming‘ by retailers on turnover rents could be recouped with innovations stimulating dwell time and foot flow, such as increased leisure and foodcourt components, to support increase in-centre impulse sales platforms such as kiosks.

However, this will require significant up front investment by shopping centre landlords and developers, a long-sighted challenge that asset trading investors may not fit the business model of some. With the result that the product spread of traditional retail centres will likely narrow over time, and some will fail the test and look to reposition and repurpose to survive, said Otis Spencer of Peakside Capital.




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