ACROSS: The core business of URW in Germany is the operation of shopping centers. How is business currently going?
CONSTANTIN WIESMANN: Since its onset, the coronavirus crisis has presented all market participants with major challenges – including those of us at URW. It is clear that the lockdown, the rent moratorium, and reduced collection rates have left their marks. Since June and July, however, the development in footfall and revenue has been positive. Naturally, the situation varies from branch to branch and from location to location, and clear differentiation has to be made.
However, in many segments, we are close to pre-crisis levels. We are also seeing strong catch-up effects in some areas, for example, in consumer electronics. Accordingly, we are optimistic – but still very careful and prudent regarding protection and hygiene measures. Compliance with those rules is essential for the continuation of business.
ACROSS: The relationship between tenants and landlords in the retail sector has been in the spotlight since the beginning of the crisis. How has URW proceeded in Germany?
WIESMANN: The situation was new for everyone. There was no blueprint. From one moment to the next, sales collapsed completely and entire business models were, and in some cases still are, at risk. This situation is extraordinary. The things that matter in times like this are open and authentic communication, cooperation, and partnership – tenants and landlords are a community of fate. This is the attitude that we have maintained in all of our discussions with our tenant partners since the beginning of the crisis.
We operate 23 centers in Germany and have around 3,500 leases, which amounts to a lot of discussions. Most importantly, we do not look for one-size-fits-all solutions: We discuss individual solutions with each tenant and for each store. This is the only fair and goal-oriented way forward – for rental partners as well as for center operators and owners.
ACROSS: In view of the structural changes and economic challenges in the retail sector, do you expect increasing vacancies and further distortions?
ANNA LAURA RIEMANN: We do not expect anything significant for the centers we operate. Anything less than 2% is a strategic vacancy for us. We also need a certain degree of flexibility to change and optimize the tenant mix. With regard to the management portfolio in Germany, on average, we are unlikely to exceed the 2% limit. That is largely due to our long-term strategy.
Years ago, the URW Group decided that we would only concentrate on the very best locations and large flagship destinations. As a result, we have an excellent portfolio, which is very attractive and excellently positioned in the market.
Five of the 10 largest German shopping centers are in our management portfolio, four of which are either owned or co-owned by URW. Retailers are looking for attractive spaces that offer high footfall and square meter sales, strong mixed-use elements, destination characteristics, and supra-regional appeal.
Such locations are the best platforms for retailers, brands, and innovative concepts and also serve to boost the online sales of companies. Such strong physical representations, where brands can be experienced using all senses, where emotions and experiences are possible, form the basis, the backbone of successful omnichannel strategies.
ACROSS: Speaking of omnichannel strategies: How has URW positioned itself in Germany?
WIESMANN: It is clear that the coronavirus crisis has accelerated the transformation of retail and the retail real estate sector. Omnichannel models were significant for the future before the crisis. Now, they are even more important. URW has, therefore, entered into cooperation with Zalando via their “Connected Retail” platform – an omnichannel system where brick-and-mortar retailers can upload their stock to Zalando’s online shop. We have been discussing this issue with Zalando for a long time, but we deliberately accelerated negotiations at the beginning of the crisis due to the considerable challenges in the retail sector. From our point of view, all parties involved stand to benefit.
ACROSS: How exactly?
WIESMANN: Zalando has a wider range of products, customers have more choices, and retailers can use their spaces more efficiently and generate additional sales in the stores with online customers. Finally, we benefit in terms of rent when stores generate more sales.
To begin with, we are only talking about ship-from-store services. However, we have already begun to plan the second phase, which will involve click & collect or locker solutions as well as an expansion to other regions in which URW is active. The way forward is via such omnichannel models.
Another essential element of our cooperation is the optimization of delivery processes as the distances to customers will be shorter. That will enable us to contribute to more environmentally friendly supply chains. Apart from that: We have also expanded our cooperation with Lieferando in terms of food delivery, which is equally important for the omnichannel approaches of the assets.
ACROSS: You talk a lot about the future. Despite the challenges in the retail sector, what are your thoughts regarding the future of your major retail destination, which is currently under construction in Hamburg’s Westfield Hamburg-Überseequartier and is scheduled to open in the second half of 2023?
RIEMANN: The project is not solely shopping-oriented. It is a mixed-use district that represents the future of the industry. We are constructing a finely tuned mix of apartments, offices, and hotels as well as gastronomy, leisure concepts, retail facilities, and a cruise terminal.
Westfield Hamburg-Überseequartier will serve as a prime example of a lively, bustling future destination. Retail will be integrated into an open urban development concept. We are incorporating a digital infrastructure, sustainable transport and mobility solutions, as well as a wide range of services, such as omnichannel platforms and community apps.
There is a total of 14 different buildings, 419,000 sq m area, the size of the plot equals ten football fields. It is rather more of a brand-new section of the city, with all of its urban components – right in the middle of HafenCity and directly on the Elbe. We are looking forward to this project with enthusiasm, optimism, and anticipation.
ACROSS: Will there be any problems for the retail area?
RIEMANN: Westfield Hamburg-Überseequartier will be a prime example of the type of area in which retail will be the most successful in the future and in the long term. I say this with full confidence: Anyone who, like us, wants to shape the future of retail should partner with us on the Westfield Hamburg-Überseequartier project. We intend to mix local, national, and international brands, attract flagship stores, and establish a well-thought-out customer journey.
After all, people do not only visit such locations for retail-related reasons, but for the overall package as well: In addition to the retail space, there will be more than 40 gastronomy units, which have been divided into three clusters – from a lively urban quarter featuring national and international concepts throughout the day, to a cluster for authentic local street food, to a spectacular riverside promenade with exquisite à-la-carte restaurants. In addition, a wide range of leisure, entertainment, and cultural activities will be available.
ACROSS: What are your plans in that area?
WIESMANN: It is a well-known fact that we were quick to concentrate our efforts on the high leisure and experience values offered by our destinations, and that focus will be further increased in the future. We want our guests to feel comfortable at our destinations, such as Westfield Hamburg-Überseequartier, and to enjoy spending their leisure time there. We, similar to the food & beverage sctor, are planning to provide a wide range of offers.
One major component, the multiplex cinema, will probably be one of the most attractive cinemas in northern Germany due to its outstanding interior design and technology.
Another area of focus will center around edutainment and culture, and offers will also be available in the digital area: e-gaming, for example, and concepts based on virtual reality (VR) and augmented reality (AR). The fitness/health/well-being segment is another important element. The integration of a state-of-the-art medical center has been planned. Altogether, the mix will be very diversified.
ACROSS: What exactly is the status of the situation regarding leasing activities?
RIEMANN: We already have some partners from the retail and leisure sectors on board. The announcement of those and other anchor tenants will be made in a wider context in due course. We are conducting many intensive and successful discussions with a view to all kinds of uses. The interest in the market has remained uninterrupted and is at a very high level. In addition, we have already announced strong collaborations, for example, with the Accor brands Pullman, Novotel, and ibis Styles in the hotel sector and with DC Developments in the residential sector.
As we have already said, this is not just about retail. Those partners are just as relevant and essential for the overall project development. This, in particular, demonstrates the versatility and attractiveness of mixed-use projects.
ACROSS: Finally, with regard to the Hamburg project, but also in general: What are the priorities in your leasing strategy for the German market? What are your plans?
WIESMANN: As a team, we have set three goals for ourselves: Firstly, we want to create an even more exciting and varied tenant mix.
It is all about diversification. In our opinion, that involves looking much more outside the box. Of course, we are targeting smaller, local brands with sustainable offers, but we are also looking for unusual concepts that you would not necessarily expect to find at a retail destination: large Internet companies, digital brands, exciting leisure, fitness, and sports concepts, and cultural institutes. The boundaries have blurred. We stopped thinking in online and offline terms a long time ago.
Secondly, we want to work even more constructively and closely with our key account tenants and form stronger alliances. Strong partnerships are crucial for success. Thirdly, we intend to bundle our networks, experience, and expertise within the URW Group even more comprehensively. Our teams in Paris, London, and the USA have given us the opportunity to more directly approach highly successful international brands that still have very little presence in Germany. We do not want to wait for the future – we want to shape it.