Opportunities in retail for those who can take risk: JLL Co-CEOs
JONES LANG LASALLE (JLL), the global real estate services company, entered Turkish market in 2008 after acquiring the rental and management functions of Alkas Danismanlik, which had been developing projects in shopping malls and retail since 1997. Later, in 2015, JLL Turkey acquired AVM Partners, which operates in shopping center management and leasing, thus making Istanbul, along with London, one of JLL’s central hubs.
In 2019, board members Tarkan Ander and Dora Sahinturk, were appointed as JLL Turkey Co-CEOs and Co-Country Managers, tasked with expanding the company ’s activities in purchasing, building, leasing and investing in different assets including industrial, commercial, retail, residential and hotel real estate for customers from technology startups to global companies in banking, energy, healthcare, law, life sciences, manufacturing and technology. If you want to know about commercial real estate in Turkey, the people with the answers, square-inch by square-inch, are Ander and Sahinturk.
Starting with retail, the food and beverage (F&B) sector is among the most affected by the pandemic, but the one with potential opportunities. In 2021, the primary expectation of the sector, which has contracted by 65% during the pandemic, will be postponing payments and taxes. Sahinturk believes that this gap can be closed by making use of loan supports provided during the pandemic period and by using online operations as efficiently as possible. A recent study shows that 79% of people prefer to order food or use takeaway. This shows us that cafes and restaurants need to focus more on takeaway and provide the necessary infrastructure and employment for it, Sahinturk notes. “The F&B industry will develop in this direction in 2021, when eating and drinking habits will change compared to the past.”
Sahinturk expects the transition from normalization and crisis management to a healthy operation period to begin sometime in 2021, when the pandemic measures will be completely lifted with the increase in vaccinations. “When turnovers return to their previous levels, the appetite for growth will return,” he says.
However, restaurants will face two challenges in 2021, he adds: To be able to continue their operations while at the same time providing their customers with a warm and positive social experience without violating health measures. The key word here for him is “experience.” “The expectation of restaurant customers is not only good food anymore, but also to experience the pleasure of dining.”
Going forward, the experience of the pandemic will shape the way customers will interact with the dining experience and successful companies will adapt their businesses to meet these new expectations, Sahinturk says. “Some industry players, those who have the means, have turned the pandemic period into an opportunity both by adapting some of their stores to the new period and reviewing their overall operations,” he says. The hunt for creative ways to provide a pleasant experience to the customers will only increase, he adds..
TIME TO INVEST IN F&B SECTOR
When the question of whether the timing is right to invest in the F&B sector comes up, Tarkan Ander holds the floor. “Considering that the pandemic is temporary and the probability of permanent damage to the sector is calculated to be very low, it is the right time to invest for those who think finding an ideal location at a relatively low cost an opportunity,” he says. However, investors who do not have the means to take risks better wait for the period when the pandemic measures are completely eliminated.
Ander thinks that the key area where Turkey differs from the world is its ability to adapt. “Turkey turned toward e-commerce during the pandemic, when we experienced radical changes in shopping styles,” he says, adding that the rate of those who shopped online for the first time in Turkey in 2020 was 25% higher than Europe (13%). The number of internet users, which was two million at the beginning of the 1990s, has approached 62 million today. Some companies in Turkey have announced that they reached their 2023 targets in 2020. “Restaurants and people in Ardahan, Artvin, Bayburt, Bitlis, Gumushane, Hakkari, Kars, Kilis, Mus, Sirnak and Tunceli placed online food orders for the first time during the pandemic period.”
Large population, high rate of internet penetration, alternative payment systems that are develop
ing and increasing in number and advanced banking systems are among the factors that positively affect the investment climate in the F&B sector in Turkey, he says. Besides, the high proportion of youth in the population and their rapid adaptation to new technologies and innovations also contribute to the development of the sector, he notes.
INVESTORS TO FOCUS IN STORAGE
Another area of expertise for JLL Turkey is the retail sector, which had been in transition even before the pandemic both in terms of e-commerce and the nature of its physical stores. The USD 22tr global retail sector is expected to exceed USD 30tr in three years. The pace of technological advancements has become a key factor of the success or failure of companies in what is one of the world’s biggest industries. Those who succeed will need ot harness the power of big data, to help them better understanding of their customers and gain an edge over their competitors.
JLL Turkey’s research shows that logistics depos have become central to the retail sector alongside the rapid growth in e-commerce. The report predicts more growth in 2021, and more investments.
“For market players positioned as suppliers on the production side of retail, there is a significant growth opportunity in analyzing customer demands accurately and investing in multiple sales channels in a favorable period of reasonable rent and high incentives. These suppliers can start their national brand journey in 2021 with prudent financial and operational planning.”
Contrary to some perceptions, shopping malls continued to be at the forefront during the pandemic period as one of the most important real estate segments suitable for investment, according to JLL executives. “Although there are some negative scenarios in predictions for the post-pandemic period, shopping malls will continue to be one of the most valuable real estate segments, but they will transform,” they say.
RETURNING TO PRE̞PANDEMIC TURNOVERS
The key for shopping mall investors will be to ensure the continuity of the shopping center in the most healthy and full way possible and to restructure debts, the JLL Turkey executives say. “We predict that financially strong investors will leave the epidemic period behind in a position of strength. However, there may be a significant consolidation in 2021 with the impact of investors who do not have favorable conditions for refinancing.”
Shopping malls should communicate four main message, according to JLL Turkey’s 2021 Marketing Vision report: Fresh air, regular cleaning, well-arranged open spaces and the creation of distanced seating arrangements. “In addition, studies will be carried out to measure satisfaction at regular intervals, to use digital channels regularly, to increase personal communication methods and online training.”
2021 will be also a year to focus on increasing turnovers to pre-pandemic levels for retailers. The Shopping Mall Retail Turnover Index decreased by 22.6% to 236 points in February 2021, compared to the same month of the previous year, according to a report by the Council of Shopping Centers (AYD). Turnovers per leasable area (square meter) in shopping malls were TRY 1,088 in Istanbul and TRY 776 in Anatolia in February 2021. The square meter efficiency in Turkey was realized as TRY 901 in February 2021.
FROM SHOPPING MALLS TO LIVING SPACES
The use of space in shopping malls will also be reviewed and idle areas will be transferred to alternative functions such as inter-city distribution centers, agricultural area, libraries, concert halls, art spaces, study rooms, educational institutions and different entertainment concepts. “Repositioning the shopping malls as living spaces will be among the remarkable marketing visions of 2021,” JLL predicts.
There is also a transformation in services for shopping malls, according to JLL Turkey 2021 Marketing Vision. Creating online order delivery points in shopping centers is one of the most innovative applications in this regard. Contactless campaigns through applications or websites, safety lockers, gift wrapping service, pet deposit points, free valet service for families with children are among the innovative 2021 trends that will transform shopping centers into living spaces.