The retail real estate industry is undergoing a transformative phase and 2024 will be no different. At Sonae Sierra, we are actively engaged in this process by shaping future-proof and resilient portfolios that integrate high demand requests and environmental standards, aligned with our decarbonization strategy.
The challenges faced by the placemaking industry in 2024 require a proactive and adaptive approach. One of the primary hurdles is the persistent impact of high inflation levels and the decelerated increases in interest rates. Nevertheless, the retail sector has demonstrated resilience and we’ve been assisting to a good performance in the countries where we operate, with sales overcoming inflation. As professionals in the retail real estate sector, we closely monitor the evolving context and adapt our offer to current economic climate.
The significant changes we see in consumer behaviour and preferences are also crucial to adjust the balance of offers in our integrated experience and fulfil a large spectrum of diverse needs, allocating appropriate emphasis on each asset type and location to create a holistic and appealing retail environment.
A shift towards mixed-use spaces
In property management, several promising opportunities and trends are shaping the landscape. Digitalization stands out as a key trend, allowing to manage properties more efficiently. Furthermore, sustainability will remain critical in property management, allowing our portfolio not only to be operated in an energy efficient way, but also helping overcome global social challenges and making our living spaces future proof.
Amid these trends, as opportunities, we notice a notable shift towards mixed-use spaces, easily adaptable to fast shifting trends while providing a wide range of services. Our current focus is already directed into designing and developing projects that incorporate a diverse mix of stores with customizable products, health spaces, events, entertainment, leisure areas, and dining options.
In seizing these opportunities, we’ve observed the industry’s resilience and adaptability, even in challenging times. Our shopping centres have maintained high occupancy rates, thanks to our ongoing collaboration with tenants, in order to make the shop offer more robust, differentiated and relevant, providing new experiences to consumers. Together, we leverage the overall value of the asset and work closely to provide visitors with new experiences through a diverse range of innovative stores and concepts.
The emphasis is on asset repositioning and repurposing
There are fundamental and lasting changes anticipated in the retail real estate industry. Investors are increasingly following high-quality, sustainable, and innovative assets that can provide unique and modern customer experiences. A notable trend is the increasing emphasis on asset repositioning and repurposing, as well as a shift towards mixed-use developments, which not only creates new central hubs but also brings benefits to the surrounding community, contributing to the revitalization of urban areas.
At Sierra, we early on recognized the importance of a clear ESG (Environmental, Social and Governance) strategy fully integrated into business activities. We acknowledged that the growth and performance of companies in the real estate sector hinge on their approach to sustainability and their contributions to addressing the environmental and social challenges of the communities they serve. Therefore, recognizing the significant impact of real estate assets on the environment, we expect investors to look for assets that stand out for their alignment with ESG principles.
With regards to the current market situation, a proactive risk management and a flexible investment strategy are recommended. Recognizing the importance of customer orientation, unique shopping experiences and a high quality of stay remain the most important success factors for attractive retail real estate sites. At Sierra, we actively encourage other companies to integrate sustainability principles into their business strategies. By making real estate sustainable and resilient, we can better secure our future, ensure the viability and profitability of real estate investments, and create future-proof urban spaces worth living in.
Christine Hager is Director of Property Management for Sonae Sierra in Germany.