MAPIC Bounces Back as Mixed Use, Entertainment Trends Accelerate
The real estate trade fair put on an optimistic outlook, but acknowledged that economic trends and sustainability are challenges.
CANNES, France – Brick-and-mortar is back as retail looks to reconnect with consumers after two years of on-and-off closures and restrictions.
That was one of the key takeaways from the MAPIC retail real estate conference, which returned to a full program for this year's edition.
While pre-pandemic “normal” doesn't look to return any time soon in the face of ongoing global economic and political challenges, retailers and shopping center developers alike are responding to new consumer patterns and the increasingly competitive landscape with new amenities, entertainment and embracing omnichannel integration.
The conference opened under the theme of “People, Planet and Profit” and attendees tried to offer up a positive vision of retail's future with a focus on sustainability
— not only the catchall buzzword that encompasses all things environmentally friendly but keeping retail shopping centers vibrant and viable in the long term.
Two floors of the Palais des Festivals were full once again, with significant space devoted to leisure and food and beverage concepts. Organizers cited 5,000 participants from 75 countries, down from a 2019 high of 8,500, but demonstrating the resilience of the sector. The tally included 1,600 exhibitors, and brands were back as well, though this year many were invited guests or paid steeply discounted rates in a move by new organizers RX France to ensure attendance.
The Middle East and Asia demonstrated their growing retail ambitions with some of the largest stands on site. Saudi Arabia's Diriyah Square had the biggest announcement of the week: It will be partnering with Time Out Market for a 1,650-seat dining, event, exhibition and performance space slated to open at its luxury village in 2025.
On the ground, participants were energetic and upbeat about the future of retail centers even as consumers change the way they shop. Developers doubled down on expanding as entertainment destinations and accelerating growth of new activity concepts that were in play pre-pandemic, while looking for new ways to catch busy consumers' attention.
“Hundreds of malls around the world are struggling for identity,” said Thomas Cartledge, chief executive officer of consulting firm Benoy. “We've exhausted [food and beverage], we've exhausted leisure. What's next? Is it art, is it culture?”
At the American Dream mall in East Rutherford, New Jersey, which already includes a DreamWorks water park, Legoland and Nickelodeon Universe
Theme Park, the next evolution of entertainment includes building a massive esports arena.
The new space will be more than 40,000 square feet over 2.5 floors, to host monthly events with up to 2,000 audience members. The space will tap into not only esports stars but musicians and professional athletes as well that monetize gameplay through Twitch and other streaming services. The space also will include a social media lounge where influencers can broadcast live and create content.
It follows American Dream's partnership with Mr. Beast, whose appearance there in September saw thousands of fans line up and even camp overnight to see the YouTube star. The activations are all part of American Dream's efforts to boost footfall at the project, which has struggled to lure shoppers in the wake of the pandemic and has missed several debt payments.
Via Outlets, in the midst of a 17.5 million euro expansion of its center in Sevilla, Spain, created a “Pink-Tok” room as a dedicated space for guests to take photos and film content for social media and have added art installations to its properties in Lisbon, Portugal, and its center near Davos, Switzerland. “It's a ‘wow factor,' adding something that a guest won't expect,” said chief executive officer Otto Ambagtsheer. “It's part of the placemaking, to create something that people will remember.”
Other developers cited adding in social services, including city libraries or medical centers. “It's the amenities that a town center would have, a retail center can incorporate to become a more long-term, sustainable place,” said Cartledge. “Some that are loss-leading, the landlord may take the view that it's actually worthwhile putting that in there and losing money to generate footfall.”
“Shopping places are becoming like the Roman Forum,” said Peter Wilhelm, chair of the European Council of Shopping Places. “We are going back to the origin of retail, when people were going to the market not only to shop but also because it's a place where you meet people.” He noted that many malls transformed into vaccination centers during the pandemic, cementing their key role as community centers.
New amenities are key to upping footfall postpandemic, and it has been elusive so far. A study from European commerce federation Procos-Eurelia showed that despite a slight upswing from 2021, traffic remains down about 10 percent from
2019 numbers across the continent, with Germany, France and the Nordic countries particularly hard hit, down more than 20 percent.
Despite the decline, several landlords said that internal numbers show individual spend is higher, helping put the ongoing online vs. brick-and-mortar debate to rest. While online sales remain higher than 2019, they are contracting, according to Procos. Brands, particularly luxury and premium labels, have realized that the costs of online sales — with shipping, logistics and returns — are cutting into their margins.
“We have seen the turning point,” said Patrick Delcol, head of European Retail at BNP Paribas Real Estate. “We have the pure digital channels online basically declining. It's not one against the other — it doesn't matter to the customers. It's a fact that physical stores are of key importance to support the digital channels.”
He added that increasing interest rates and the end of free-flowing money puts the pressure on online retailers to show earnings and not just grabbing market share.
Digital-native, direct-to-consumer brands, particularly in the beauty space, are looking to open or experiment with physical brick-and-mortar stores. Online returns are also benefiting outlet shopping centers, which are taking on the excess inventory, and expansion of those spaces is coming as inflation hits households and consumers become more cost-conscious.
“This year has been one of our highest transactional years in terms of new leases, and we've been upsizing brands that are performing very well,” said MacArthur Glen managing director of leasing Nick Brady, which works with brands including Armani, Gucci, Karl Lagerfeld and Nike. “We talk a lot about making the big bigger. We have done a lot with our luxury brands. They're looking to bring newer concepts to their retail channels, both physical and digital.”
As luxury and discount expand, many executives are predicting a wave of consolidation for mid-tier centers in the U.S. and Europe. The U.K. is particularly ripe for acquisitions, as properties have lost up to 70 percent of their value as investors reprice assets.
Still, there's a reticence in the market to throw money at mid-size centers, said BNP Paribas' Delcol. “Many investors are waiting to see a bit more clarity and waiting for the interest rates to stabilize before eventually coming back to the market,” he said.
With more cost-conscious consumers and the expectation that the world is heading toward a recession, shopping could be set to plunge. That could lead to a drive for consolidation of the shopping center market, with a few of the big players snapping up smaller, older centers with an eye on redevelopment.
“I think you will see more Asian market activity coming into the European market and buying up some of these malls, because they'll take the view that they can bring some of the Asian retailers with them and that might bring life back into them we haven't seen for a while,” said Benoy's Cartledge.
The outward optimism of the market glossed over a cautious undercurrent as developers assess a combination of geopolitical headwinds and economics, and the energy crisis in Europe was a hot point of discussion. One landlord said their energy bills had risen 600 percent in the last year, causing it to put any capital investment and expansion plans on hold.
Via Outlets' Ambagtsheer said they are developing solar projects in Spain, Portugal and Norway to create their own energy supply, which can then be offered to tenants as a way to cut costs.
The need to rein in the energy costs is leading to jumps in sustainable planning, with the word on everyone's lips, from developers — who are feeling pressure from all fronts — to brands.
“We're definitely looking at sustainability as a key issue [in financing],” said Rioja Estates managing director Giles Membrey. “[Investor funds] are coming to you saying, ‘We won't even look at anything unless it meets our specific criteria in terms of sustainability and ESG checks.'” Value engineering the upscale feel of spaces so as to work with premium and luxury brands is a balancing act.
“We see that there's more and more regulation coming in with ESG standards, and that we need to implement them.
But brands are also requesting a lot of information from us and specifics about what we are doing in terms of saving energy and what materials we're using,” said Promenaden Management chief executive officer Annette Lund, which works with Balenciaga and Valentino and will open a Dior door this summer. “It's kind of coming from both sides.”
“Brands will not want to be associated with a development which doesn't have a strong sustainability agenda. There's a risk that certain brands won't occupy space if your corporate strategy is not delivering against targets that are consistent with their corporate strategy,” said Alex Avery, CEO of commercial strategy firm Pragma.
From a brand perspective, sustainability is key to attract consumers as consumption patterns change. “The pandemic, the environmental crisis, and now the economical prices have accelerated the demand for change to a more responsible way of consumption. There is clearly a demand coming from our customers,” said Adidas vice president retail expansion Alexandra von der Grün.
While one brand representative said there were “some hard conversations to be had,” von der Grün remained positive. “We have reached out to all of our big landlords and I can tell you, the doors are open everywhere. But I think both sides at the moment are in the establishing [standards] phase. That will accelerate in the next year, but there is a lot of speed on both sides.”
Ingka Centres, which operates 49 centers mainly in Europe, China and India, launched a 700-square-foot circular fashion concept space in Sweden in June, which it hopes to roll out to other locations soon.
“Customers are saying they want to have a more sustainable way of living, but sometimes they don't know how to do it,” said Vasco Santos, global sales and leasing director, Ingka Centres. “So they want companies to inspire them and we have a role to lead the way.”