The retail business, especially when it comes to large retail properties, is not for those who are set in their ways or for traditionalists. It is certainly not for those who are unable to see the bigger picture. The way I see it, these well-known facts have become increasingly important. Why? It’s because trends are changing more and more rapidly, consumers seem to change their shopping habits on a daily basis, and renowned brands can disappear overnight. You have to anticipate and respond to changes taking place in the world of values, caused by issues such as digitalization or demographic change. However, there’s no need to worry if you understand one thing. Shopping centers are subject to natural evolution and have become much more than just sales channels. As the world of shopping centers evolves, relationships with retail partners, customers, and brands change right along with it. Not only have they changed, they have become increasingly important. Well, some might regard that as self-evident. After all, the vital role played by partnerships is now widely recognized throughout the industry.
Nevertheless, I would like to make a case for strong, far-reaching, and therefore innovative partnerships, as we understand them. We have always relied on partnerships at SES. Virtually everything we do is rooted in that approach.
When it comes to retail real estate, the key thing that must be understood is that EVERYONE has to be successful, and that requires a strategic approach. Our partnerships with retailers, restaurateurs, and service providers are based, first and foremost, on a profound understanding of their business models and the associated needs. Our partnership approach is reflected in the fair, performancebased leases that we enter into (revenue-based rents, graduated rents, etc.). In order for a partnership to work well, both the tenant and the landlord must meet on equal terms and agree on an appropriate rent. In doing so, both parties have a shared interest in ensuring that business runs smoothly every day. Having a mutual understanding of each other’s needs is also advantageous when major changes are on the horizon. The retail sector, as mentioned, is currently undergoing rapid change. Retailers and real estate operators will not get very far if they try to tackle this challenge alone. A partnership based on a deep understanding of how brands operate and need to position themselves allows for a high degree of adaptability and rapid implementation, which, in turn, leads to mutual success. In the early 2000s, for example, around 90 percent of our stores were multi-brandstores, whereas today 90 percent are mono-brand stores. This has required both sides to take a fresh look at the way things have always been done. By taking this approach together, and by allowing ourselves to try new things, we can become a retailer’s preferred partner. At the end of the day, that’s what we want, isn’t it?
Being on equal footing with tenants also means that: If, for example, you convert your F&B area and introduce new concepts, you cannot be a distant landlord. You have to stand by your tenants and actively support them, for example, when it comes to building services or start-up investments. Innovation can also gain momentum as a result.
Of course, partnerships are subject to fluctuations; sometimes, one party benefits more than the other. Overall, however, we are all better off if we try to understand the other side. That’s the only way to ensure that everyone is on the same page, which is a prerequisite for success. That doesn’t mean we shouldn’t strive for high performance, though. Inditex, Intimissimi, and INTERSPAR, to name just a few of the companies that start with the letter “i,” rightfully demand that our centers operate flawlessly. A continuously optimized tenant mix and coordinated events that attract large numbers of customers are the result.
“Our goal is to understand the changes our tenants need to make and, where necessary, give them sufficient preparation time”
I cannot stress enough that this optimal outcome can only be achieved by working together. In concrete terms, our goal is to understand the changes our tenants need to make and, where necessary, give them sufficient preparation time. Supporting new, small, or regional tenants, who are incredibly valuable to the overall shop mix, and providing them with assistance is also essential. They are not backed by large organizations or teams of experts. It is imperative that we treat them as equals, involve them in the process, and enable them to grow. Time and time again, we discover hidden gems that have tremendous potential but are in need of a reliable partner to support them when they are just starting out.
If you think about partnerships holistically, it goes without saying that as a retail property operator, you have to think beyond your retail partners. A third party must also be included in the equation: the customer. Seeing customers as more than just a pair of hands with a wallet full of money, but as people with constantly changing needs, is a paradigm shift. Changing needs are not only driven by social media trends but by individual stages of life as well. Being there for customers as a partner during the different stages of their lives builds much more than customer loyalty. It creates an emotional bond that, in the best case, lasts a lifetime. To that end, SES has developed concepts for young urbanites in need of space for outdoor activities – at ALEJA in Ljubljana. We’ve just started setting up health centers at selected properties in partnership with the local community. At VARENA in Vöcklabruck, we host over 1,000 children’s birthday parties a year, all of which are supervised by four permanent staff members. We are building partnerships that start as early as kindergarten.
Fortunately, the success generated by good partnerships can be felt rather quickly. Such relationships grow and constantly give rise to new developments. Tapping into that potential not only results in success, but I also find it personally fulfilling and incredibly exciting.
Marcus Wild
Member of the Executive Board for Real Estate and Innovation at Spar Austria
