Europe’s city centers – shopping centers are part of them

By Alexander Otto, Chief Executive Officer of ECE

Shopping centers are an essential part of our city centers and can significantly contribute to their sustainable development. For quite some years now we have been experiencing a renaissance of the city centers; this trend has also arrived in the peoples’ and policy-makers consciousness. City centers are places of living, working, leisure, and shopping.

Integrated and tailor-made shopping centers can support this renaissance. As the cities’ partner, the shopping center industry can generate a win-win situation together with the cities and the existing retail. There are numerous best-practice examples that show how city and center can mutually benefit from each other.

In this respect, I would like to emphasize: well-integrated and professionally managed shopping centers can contribute to solving urban development problems. As magnet they bring further purchasing power to the city, also to the benefit of retailers outside the center. However, shopping centers cannot be a cure-all and completely compensate missing willingness to invest. Nonetheless, they often are the initiator that causes a city’s building owners and retailers to modernize their real estate and improve the way they present their goods according to the current state of the art.

Also shopping centers must be further developed and modified continuously. Since the requirements of cities, investors, retailers, and not least of all the visitors and customers are different today from what they were ten years ago. And they will have changed fundamentally in another ten years’ time. This makes it even more important to take this into consideration when developing shopping centers and during operation.

Below I would like to name five points, which, in my opinion, will influence the sustainable and successful development of shopping centers in the course of the next years.

1. Focus on city centers

Center development has been focusing clearly on city centers for some years and they will remain in the developers’ and investors’ focus. By now, nearly 70 % of the shopping centers are being developed in city centers or city districts. This trend has been strongly supported by the cities and planning authorities since the development of a shopping center nearly always has more positive effects for a city than developments on the green field. For decades, ECE has been consciously concentrating on city centers and district centers when developing shopping centers.

Experience has shown: a center can only be successful in the long term if the remaining city also functions in the long term. Today’s demanding customers want both – the advantages of a center (light, safe, clean, parking spaces, independent on weather) as well as the charm of grown malls and pedestrian zones. Our studies prove: most of the center visitors also walk through the pedestrian zones. Especially shopping galleries in city centers with a sales area of 15,000 or 25,000 m² cannot exist independently. They are too small to provide all the range demanded by the visitors. Instead, they bring missing branches such as grocery stores in the city, which cannot pay the rents in the pedestrian zone.

2. Individuality instead of standard concepts

There are no “standard cities” and thus no standard shopping centers formats for cities. Each city is different and has its own framework conditions and structures. Consequently, individual answers must be found for each city when planning shopping centers or other forms of trading. Generally valid guidelines and common reference values are unrewarding – for the cities as well as developers and investors. It is rather to be focused on the question what is missing in a city and which concept permanently works under the given conditions.

Also in terms of shopping center architecture the visitors’, retailers’, and cities’ requirements call for individual and sophisticated solutions. Only few buildings in a city are discussed so intensively and are accompanied so closely as a new shopping center – usually with positive consequences for urban development.

3. Revitalization

According to an analysis by the German Company for Market and Sales Research (GMA) from 2010, 48 percent of all shopping centers in Germany urgently need to be revitalized. This does not only mean a new coat of paint but a complete reorientation of the commercial building. Reasons for delayed modernizations are diverse and range from low awareness for revitalization needs, complicated ownership structures, tight financial means up to missing know-how. Those who react too late often enter a downwards spiral of dwindling numbers of visitors, drop in sales, vacancies, and depreciation of the complete property – and this often with negative consequences for neighboring retail.

But also younger shopping centers are not always performing well. According to an analysis by the market research company GfK GeoMarketing from 2010, every third shopping center in Germany flopped with too low output per unit area. Most common deficiencies are bad layouts, wrong settlement of anchor tenants as well as a non-tailor-made branch and tenant mixture. Nearly half of the suffering centers are not big enough – which is why they do not develop drawing power. Around one third has too many floors, eleven percent flop due to management mistakes.

Continuous modernizations, adjustments and extensions of shopping centers are daily business for experienced shopping center operators. Only those who always keep their centers up to date will be successful in the long term. A simple principle that, however, is often disregarded.

4. Multifunctionality and quarter developments

Many cities want multifunctional projects and complete quarter developments. As difficult as this may be in each individual case as successful can the results be if cities have clear ideas that don’t loose sight of feasibility and economic efficiency. Thus, ECE did not only integrate a building under monumental protection in the extension of the Altmarkt-Galerie in Dresden but also office space and a hotel. In Frankfurt, Skyline Plaza will additionally house a conference center, a large fitness and wellness provider and a roof garden. And in Stuttgart, between 400 and 500 apartments are being constructed on the quarter at Mailänder Platz.

Shopping centers can assume the role of a motor for quarter development. In Leverkusen, a new town square was created around the Rathaus-Galerie with integrated conference hall for the city council. In Ludwigshafen, ECE developed the Rhein-Galerie on fallow premises of the former container port and hence opened the city center down to the Rhine banks for the first time.

5. Sustainability

Visitors and cities expect that also shopping centers face their responsibility regarding environmental and climate protection; retailers pay attention to low ancillary costs and many investors already know that only sustainably planned and built shopping centers will be permanently successful. ECE as investor has always been thinking in the long-term and hence sustainably. The success: numerous certifications from the German Sustainable Building Council (DGNB) and the certification of the Ernst-August-Galerie in Hannover as most sustainable retail project in Europe. But this is not enough to satisfy us. Together with the University of Karlsruhe we developed a large “Manual for Sustainable Shopping Centers” in 2010 which today forms the basis for all new projects. Furthermore, we published the manual “Sustainable Operation of Shopping Centers” last year, the focus is on the already existing shopping centers. Here, we still see great potential – even if our German centers are already operated with certified green power.

Conclusions

City centers will remain vibrant market places with a significant power of attraction for the people. In this respect, the center industry bears great responsibility. Today, there are already numerous examples of excellent concepts for successful quarter developments and integrated shopping centers. These best practices are to be identified in a further process of discussion. On the one hand, each city has its own character and thus must find very individual answers to the challenges of city center development. On the other hand, examples can provide valuable inspiration and positively influence the dialogue between cities and municipalities.