By Angelus Bernreuther
The placemaking industry has encountered numerous challenges in recent years. However, unlike other asset classes such as offices, retail real estate has already adapted its business model to meet current conditions. The pandemic, in particular, has accelerated various trends within the retail sector, making it more predictable for investors. Grocery-anchored properties have demonstrated resilience, as have retail parks and establishments focused on essential needs.
Moving forward, the investment focus will shift towards pricing and opportunities. Successful outcomes will hinge on active asset and investment management in close collaboration with tenants. Refurbishments are expected to be favored over new developments, especially since many prime locations are already established and recognized by consumers. More than ever, a future-proof tenant mix will be crucial.
In smaller towns, placemaking will increasingly focus on sharper, more daily-need-oriented concepts in clean, inviting environments. For larger assets, particularly shopping centers, there will be a greater necessity for comprehensive restructuring. This includes expanding food and beverage options beyond traditional food courts, incorporating additional services, and considering non-retail uses (such as office spaces on upper floors). This brings us back to a value-add strategy, as capital expenditures for the new tenant mix must be factored in.
The overarching shift toward increased uncertainty in today’s economic and political landscape may also encourage a more hands-on approach for our retail assets. Standard, plain vanilla assets are no longer viable. The ongoing evolution of consumer behavior and tenant demands will necessitate a proactive management style. Ultimately, this will create a win-win scenario: modern shopping environments for customers, paired with up-to-date tenants that yield risk-adjusted returns for retail real estate investors.
So, roll up your sleeves!
Angelus Bernreuther
Angelus Bernreuther is Head of Business Development at DEFAMA, and Member of the ACROSS Advisory Board.
