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The shopping Centre market in Belgrade is still in its infancy but big changes are coming

Mr Alex Linchev has wealth of experience in shopping malls and across various real estate asset classes.

He has been in the industry for over 15 years, dealing with residential, office and retail property, golf resorts, leasing to more than 300 international and regional malls’ tenants, shopping center marketing and asset management in the UK, Bulgaria and, since September 2019, also in Serbia.

Mr. Linchev, in the capacity of an asset or mall manager, has managed more than 130 000 m2 of shopping center leasable space, spread across two countries and 4 cities, working for one of the biggest retail and office developers and managers in CEE – the Polish based GTC S.A. Currently Alex Linchev is engaged by the GTC branch in Serbia for managing the newly opened Ada Mall in Belgrade.

How will the mall of the future, say in 2 years from now, look like according to you?

Not just the mall, as the largest contemporary market place, but also retail itself will change dramatically within 2 to 5 years from now. One important aspect is technology, which will become more than ever interwoven with retail. It had been front and central during the pandemic outbreak and it continues to accelerate. Look at what happens to the big world players on the market – Ingka Group (owner of Ikea anchored malls in places like China, Italy Russia), has launched EUR 7.3 billion investment for the introduction of their LIVAT online community that brings their malls’ customers and tenants together not just as another online sales channel but also as a platform to exchange lifestyle ideas and feedback. Unibail-Rodamco-Westfield Germany, part of the largest commercial real estate company in Europe with shopping centers all over the world, announced strategic partnership with Zalando, an e-commerce giant based in Berlin, which will enable the URW tenants to access through Zolando Europe’s largest online fashion platform. Another utilization of technology already ramped up by many big mall owners is using loyalty apps, free Wi-fi, beacons throughout different areas of the malls, point-of-sales-date and security cameras to establish the real demographic profile of malls’ customers and their shopping habits.

Adoption of technology, however, has bigger repercussions for the shopping centre industry. Smart technology and online sales will rejuvenate the whole industry in many ways. One is the much resented by classical landlords idea of re-inventing the malls’ lease agreements. Simply tying rent to sales in shops is not a long-term option. As malls invest more in technology and their separate online shopping communities, we will see financial leases with tenants shifting to new lease charges tied to footfall (for example the number of customers entering the shop or the mall area around the shop), new charges contingent on sales, realized both in the shop and online (for example tenants might pay to the mall percentage of their online sales generated through the mall’s online portal or within the mall’s geography, sorted according to postal codes within the mall’s primary catchment area) and similar.

Another obvious result from the rapid adoption of technology within shopping centers is the omnichannel experience, or as the professional jargon goes „browse offline, shop online“. This model is already adopted by leading retailers such as IKEA in their so called pick-up stores. These are smaller showrooms where customers can visit, see and try the furniture and if they want to order something which cannot fit their shopping bag (so items bigger than small home decor and appliances), they can do it online either on their own or in the Ikea pick-up store. Thus the goods ordered usually arrive in the pick-up store within a much shorter period than the usual online delivery (for example within 5 days, instead of within 2 weeks), delivery is completely free of charge for the customer, and the customer can either pick those goods up from the pick-up store or just pay for the additional delivery from the pick-up store to their home. At the same time Ikea doesn’t have to pay for larger shop space and huge storages it would have otherwise resorted to, had it been a traditional Ikea shop.

What will be the typical profile of a future mall visitor?

Traditionally, the typical mall visitor in Central and Eastern Europe is predominantly young 14 to 40 years of age, those above 35 usually married with one or two kids, educated and middle class. Meaning, a combination of two generations – millennials and the younger Z generation. More and more studies focus now on the customer psychology of the Z generation, who are much more elusive to traditional marketing approaches but yet quite valuable as they proved to be more resilient to consumer shifts caused by the pandemic and surprisingly show preferences towards brick-and-mortar retail, new brands, start-up ideas and hold less focus on classical luxury or image brands.

How will the office of the future look like?

I think it will need to feel home, be spacious but yet provide personal space and seclusion and above all be a fluid concept between working in an actual office, in a virtual meeting space, from the comfort of your home or from anywhere you chose to be. The office building will need to be conceived with much more greenery, common space and wellbeing zones than the current model, which simply pivots around gross leasable area utilization and imposing interior or exterior architectural and design stunts.

Is there a silver lining for retailers and mall owners under the new normal? Where do you see the opportunities?

The silver lining is for those businesses willing to accept the new normal as an opportunity rather than a restriction or an overblown apocalypse. The retailers will seize the opportunity if they:

  • overhaul their supply chains to make them leaner, diversified and efficient
  • instead of simply abandon store locations in favor of online, close down underperforming shops in weak malls and redesign existing ones
  • change store environment, assortment, digital and omnichanel capability
  • more than ever pivot on providing an immersive, informative and efficient customer service and experience in the physical stores
  • watch out for new tendencies, thought to be impossible till not long ago, such as the possible change as to when new collections become available in stores. As some premium designers began to foretell, one consequence of the pandemic could be that you buy your summer clothes in the beginning of the actual summer, not in the middle of the winter as the traditional model goes.

How would the new normal shape consumer behavior?

Consumers will become much more observant regarding things such as accessibility, value for money, loyalty programs, wellbeing products and services, merchandising and style of displaying products which enable the customer to find their way to the desired product or section within the shop easily and quickly with minimum human interaction, contactless payments, omnichannel options, knowledgeable and efficient sales force and more. Discretionary spending will continue to fall and will revamp by end of 2022, should there be no new worldwide lockdowns.

How do you see the retail and commercial real estate market in Serbia?

Well my observations are mainly for Belgrade. The city is an exciting and challenging boiling point of retail real estate investment, with 2 or 3 international players and strong local presence. The shopping Centre market in Belgrade is still in its infancy but big changes are coming along in the coming 12 months. Soon the capital will avail of some 550 000 m2 shopping centre space within an area of around 10 square kilometers, or this is 310 m2 per 1 000 inhabitants. As a comparison, in Sofia there is 320 m2 shopping centre space per 1 000 inhabitants. Still, this will put a considerable amount of strain both on landlords and tenants in the capital.

What are the differences between the retail market in Serbia and the rest of Eastern Europe?

For me Serbia and Belgrade still have larger unused potential on the real estate front, both in the office and the retail sector. Most economists predict that precisely retail spending will drive the country out of the pandemic recession.

How do you expect relationships between landlords and tenants will develop in shopping centers?

I believe that those tenants who have been financially strong before the pandemic and who have invested in their digital as well as customer support will excel. Rather than just closing their brick-and-mortar assets to save money, they will instead transform them into part of the omnichannel sales. These tenants will need landlords with good assets even more than before, just like landlords will need them now.

Does Belgrade need so many shopping centers and how can they differentiate between each other?

That is currently a bone of contention. I believe those malls with good central location, easy access, balanced tenant mix, manageable size and long term commitment to loyalty and digital investments will enforce their positions within an year or two from now. I expect that 3 to 4 assets will follow successfully this path and the rest will be subject to heavy competition and a longer transitional period.

Izvor: BIZLife magazine

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