Wrap-Up Keynote Lecture
Retail Development in Uncertain Worlds MAPIC 2010 Chris Igwe Head of Retail Senior Director CB Richard Ellis
CB Richard Ellis | Page 1
François Ortalo-Magné Director, Global Real Estate Master Robert E. Wangard Professor of Real Estate Wisconsin School of Business
UNCERTAIN WORLDS?
COMPONENTS FOR THE NEXT STAGE OF DEVELOPMENT AND GROWTH IN AN UNCERTAIN WORLD?
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UNCERTAIN WORLDS? 9 9 9 9 9 9 9 9 9 9 9
Sales History Benchmark Competitors Access to quality real estate Optimum footprint Planning approvals Identification of local partners Track record of franchisees Maintaining the integrity & values of the brand Choice & selection of new markets Operating costs Return on Investment
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UNCERTAIN WORLDS? Vintage Days are Over?
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UNCERTAIN WORLDS? Who holds the secret?
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UNCERTAIN WORLDS? The consumer is back!
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UNCERTAIN WORLDS?
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UNCERTAIN WORLDS
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Shopping Centre Projects Restarted Construction pipeline resumes:
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Lack of Quality Real Estate is still an issue Lyon or Paris – demand is there for prime sites
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HOW ACTIVE ARE RETAILERS 2010 203 Retailers surveyed 8 major points from the study
CONFIDENCE HAS RETURNED 77% OF RETAILERS TO OPEN > 5 STORES IN 2011
CONFIDENCE HAS RETURNED European Consumer Confidence Index September 2010
Source: Ecowin, September 2010 CB Richard Ellis | Page 13
CONFIDENCE HAS RETURNED Retailers’ Expansion Plans in 2010 and 2011
Number of stores CB Richard Ellis | Page 14
MOST ACTIVE SECTORS A. SUPERMARKETS / COFFEE & RESTAURANTS B. MID RANGE FASHION GROWTH 28% TO OPEN > 30 STORES VERSUS 16% IN 2010
MOST ACTIVE SECTORS Proportion of Sectors Intending to Acquire 30+ Stores Mid-range Fashion
Value & Denim
2010
16%
19%
2011
28%
29%
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MOST ACTIVE SECTORS Retailers Consolidate Presence in Existing Markets
Sector CB Richard Ellis | Page 17
CONSOLIDATION A. ENTERING NEW CITIES IN EXISTING MARKETS B. LUXURY & BUSINESS FASHION MORE MARKET COVERAGE – FEWER STORES PER MARKET
TARGET MARKETS
TARGET MARKETS
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1. GERMANY
41%
2. POLAND
33%
3. FRANCE
33%
4. SPAIN
30%
5. UK
29%
6. RUSSIA
28%
7. CZECH REPUBLIC
28%
TARGET MARKETS What Are the Retail Hot Spots?
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INTERNATIONAL IMPERATIVE 41% OF RETAILERS TARGETING AT LEAST ONE COUNTRY IN CEE – CENTRAL & EASTERN EUROPE AND 39% IN SOUTHERN EUROPE
INTERNATIONAL IMPERATIVE Where are Retailers Looking to Expand in 2011?
Country CB Richard Ellis | Page 23
OWN STORES VERSUS FRANCHISE PREFERENCE FOR OWN STORE EVEN IN EMERGING MARKETS
OWN STORES VERSUS FRANCHISE Own Store Expansion Preferred
Sector CB Richard Ellis | Page 25
OWN STORES VERSUS FRANCHISE Franchising More Popular in Emerging Markets
Sector CB Richard Ellis | Page 26
ON-LINE RETAIL
ON-LINE RETAIL FASTEST GROWING SECTOR MULTI-CHANNEL DISTRIBUTION STRATEGY. ANNUAL SALES CAN EXCEED € 1 M EXCLUDING VAT H&M, ZARA, RALPH LAUREN LAUNCHED WEBSITES IN 2010 50% HAVE NO PLANS TO SIGNIFICANTLY CHANGE TRANSACTIONAL CAPABILITY 30% WILL EXPAND GEOGRAPHICAL COVERAGE
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ON-LINE RETAIL
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Expansion of Online Transactional Capability
35% 30% 25% 20% 15% 10% 5% 0% Geographical coverage
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Product coverage
GLOBALISATION
GLOBALISATION
• 17 % TARGETING ALL FIVE REGIONS (EMEA, N&S AMERICA, ASIA AND PACIFIC) • 37% TARGETING 2 OR MORE REGIONS
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THE RETAIL MARKET IN FRANCE OCTOBER 2010
Economic context
Macro economic environment
The retail market in France
A weak and unstable consumption: households’ expenses in manufactured products increased in July, but fell in August Households’ confidence has slightly picked up but remains further from its longterm average Retailers’ cashflow is improving very slowly Occupancy costs are considered high, especially in shopping centres, but also in the city-centre A downward pressure on sales density (turnover/sq. m pa) due to the weak trend in sales, reduced footfall and the Internet The cannibalisation effect of e-commerce is more and more noticeable. Sales could rise from €31 Bn in 2010 to €46 Bn in 2012
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Households’ confidence index 20
The retail market in France
10
0
-10
Long-term average -20
-30
-40
-50 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source : INSEE
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Consumption will increase slightly
Trend in households' consumption The retail market in France
4%
3%
2%
1%
0% 00
Source : INSEE, CPE
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01
02
03
04
05
06
07
08
09
10 (f)
11 (f)
e-commerce did not experience a crisis Trend in B2C e-commerce turnover (in billion â‚Ź) The retail market in France
50
40
30
20
10
0 2000 Source : Fevad
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2001
2002
2003
2004
2005
2006
2007
2008
2009
2010 (f) 2011 (f) 2012 (f)
Fall in sales
The retail market in France
Average turnover per sq. m and by business sector of the 100 top retailers per category in France in 2009 Sector
Turnover / sq. m pa
Annual trend
€8,946
-7,00%
DIY / gardening
€2,216
-3,30%
Personal goods
€4,403
-2,40%
€8,564
-2,30%
€4,099
-7,50%
Sport
€3,776
-0,50%
Department stores
€5,580
-6,20%
Car centres
€3,201
-3,20%
Total sample
€6,537
-5,90%
Supermarkets, hard discount retailers, superstores
Household goods Culture, games, multimedia
Source : LSA
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Footfall in French shopping centres
3%
2.5% 1.8%
2% 0.8%
-2%
-1.7%
-3%
-2.2%
-2.5%
-2.8%
-2.9%
-4% -4.3%
-5%
-4.7%
-6% -7%
-4.8%
-4.8%
-5.5% -6.8%
-6.8%
-8% -9% -10%
Source : CNCC
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-8.4%
-6.7%
Jul-10
Jun-10
Apr-10
Mar-10
Feb-10
Jan-10
Dec-09
Nov-09
Oct-09
Sep-09
Aug-09
Jul-09
Jun-09
May-09
Apr-09
Mar-09
Feb-09
-1%
May-10
-0.3%
0% Jan-09
The retail market in France
1%
1.7%
Trend in stock of shopping centres A trend far more slow than that for the whole retail market
16,000,000 sq. m
The retail market in France
14,000,000 sq. m
12,000,000 sq. m
10,000,000 sq. m
8,000,000 sq. m
6,000,000 sq. m
4,000,000 sq. m
2,000,000 sq. m
0 sq. m 2003 Source : Panorama TradeDimensions
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2004
2005
2006
2007
2008
2009
A sensitive trend in turnover Trends in turnover of the Procos panel* of retailers
The retail market in France
(compared to the previous year, on a comparable basis)
5% 4% 3% 2% 1% 0% 2004
-1%
2005
2006
2007
2008
2009
-2% -3% -4%
City-centre and shopping centres
-5%
Retail parks *The panel is composed of 233 specialist retailers with 33,460 points of sale and 35% of specialised retail in France in turnover.
Source : Procos
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Uncertain restart to turnover Trends in the turnover of the Procos panel* of retailers
The retail market in France
7% 5% 3% 1% -1% -3% -5% Jan-10
Feb-10
Mar-10
Out-of-town specialist stores
Units in out-of-town shopping centres
Units in town-centre shopping centres
Panel Procos
Apr-10
Town centre shops
* Variations in monthly turnover compared to the previous year on a like-for-like basis of 45 sites and close to 300 retailers’ results. Source : Procos
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May-10
Investments
Investment by type of retail
The retail market in France
Retail parks 5%
Retail parks 8%
City-centre 13%
City-centre 9%
Bricks and mortar 13%
Bricks and mortar 22%
Shopping malls 10% Shopping centres 40% Shopping malls 20%
Shopping centres 60%
2009 Source : CB Richard Ellis
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Q3 2010
Retail yields
The retail market in France
City centre, n째1 sites
City centre, n째1A or 2 sites
Regional shopping centres
Retail parks
Source : CB Richard Ellis
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October 2009
October 2010
Paris
5,50 % - 6,50 %
4,75 % - 6,25 %
Regions
5,75 % - 7,50 %
5,25 % - 7,25 %
Paris
7,00 % - 8,50 %
6,50 % - 8,25 %
Regions
7,50 % - 10,00 %
7,10 % - 9,75 %
Ile-de-France
5,25 % - 6,25 %
4,75 % - 5,75 %
Regions
5,50 % - 7,25 %
5,00 % - 6,90 %
Ile-de-France
6,75 % - 7,75 %
6,25 % - 8,00 %
Regions
7,25 % - 9,75 %
6,50 % - 9,60 %
Trend in prime yields
The retail market in France
8%
7%
6%
5%
4% Shopping centres
City-centre
Retail parks
3% 2000
Source : CB Richard Ellis
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2001
2002
2003
2004
2005
2006
2007
2008
2009
Q3 2010
Conclusions
Still a challenging time for retailers
Consumers still remain cautious, even as the economy recovers as we move through 2011
For most, this is a time of real opportunity
Flight to quality will still persist
Emerging markets have recovered their attraction
Still a reduced development pipeline, but now changing as economies revive allowing greater access to markets
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MAPIC 2010 –Wrap‐Up Keynote Lecture
Part 2:
Heard on the Floor François Ortalo‐Magné with students from HEC and the Wisconsin School of Business
Remembering MAPIC 2009 • The fog is lifting • We won’t go back to the “old normal” • The “new normal” remained to be defined …. and so this year?
How does your business activity this quarter compare to same quarter last year? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Worse Same Better
Retailers
Others
Are you concerned about a double dip in the European economy? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Yes Don't know No
Retailers
Others
The “New Normal”: Real & Virtual • Slow economic growth – Consumers spend less – Consumers respond to smart retailing – Competition fosters innovation
• The internet – New vehicle for interaction – New vehicle for information delivery
Real Retail: New at MAPIC • Emerging, fast growing economies • Much to be learned and structured • MAPIC example: India Same message heard just last week at MIPIM Asia: Understand our diversity! Ö A new opportunity to learn
Real Retail: Emerging Markets • Retail as a resort destination • Broad variety of offerings within a destination • Optimal mode of entry? – Franchising – Developer as retail partner
• MAPIC example: Egypt
Real Retail: Growing Maturity • Retail integrated within the urban landscape – Large mixed‐use projects – Retail both as a destination and a place to live
• MAPIC example: Turkey
Real Retail: Mature Markets • Dealing with existing properties – Redevelopment – repositioning – Responding to new consumer – new economy
• Dealing with the existing urban environment – Given economic geography – Socio‐economic challenges
Real Retail: Mature Markets • More than the shopping center – Once‐a‐week destination: more than 4 hours – The daily destination: convenience, proximity
• Retail integrated with – The full spectrum of property types: mixed‐use – The urban/historical environment – The political geography
New Relationship with Cities • Retail as a driver – Of economic performance: shoppers & investors – Of residents’ well‐being
• Benefit from integrated approach – Across land uses within a location – Across locations within urban area Ö Not necessarily within a single jurisdiction
Virtual Retail: The Internet • It’s there – Multidimensional – Complex – Resource intensive
• It’s still evolving • We need to learn and adapt
Virtual Retail: A Complement • Multi‐functional – Inform/question the consumer – Bring the consumer to the store – Complement store offerings
• Consensus on at least one thing In‐store pick‐up of web orders works
The Internet: New Questions • What is the role of physical space? – Flagship store as communication tool – Stores‐everywhere as communication tool – Store as the start of a virtual relationship
• What (new) relationship landlord – retailer? – Contractual framework from the “real” age – But what now in an integrated real‐virtual age?
The Internet: New Questions • What relationship with suppliers? – Supply chain: shipping to store/to consumer – Retailer as partner in communication
• What relationship with the sales force? – Competitor with virtual sellers – Competitor with virtual advisors
Toward More Integration • Across types of real estate at a location – Mixed‐use development as a destination – Mixed‐use development as a place to live and work
• Across locations within a market – Residents: Each location’s contribution to welfare – Tourists and investors: Each location’s contribution to the destination’s attractiveness
Toward More Integration • Across partners – Private – Private Retailers and Developers and Investors – Private – Public Working with Elected officials and Communities – Public – Public Working across jurisdictions ÖEconomic geography ahead of political geography
Great for the Consumer? • Everyone catering to my needs – Not just my shopping – My overall welfare and that of my family – Fantastic spaces, experiences
BUT who will pay? Mobile Internet: Thanks to iPhone, Blackberry, … Ö Pricing discipline on the whole process
How has MAPIC changed your outlook? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Less Optimistic Same More Optimistic
Retailers
Others
What is your perspective on your market compared to last year? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Less Optimistic Same More Optimistic
Retailers
Others
Is your company hiring in the coming year? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
No Don't know Yes
Retailers
Others
The Future Looks Great (Even if we still have to pay for the crisis) • Great innovations coming our way – Politicians: talk to us and to each other – The mobile internet everywhere
• Contributing to a better world Real, Virtual, and In Between Ö More to learn from India!
Partners in real estate education Students who contributed to this presentation Meryl Delpech, meryl.delpech@hec.edu Yann Dauloudet, yann.dauloudet@gmail.com Philipp Kuhn‐Regnier, philipp.kuhn‐regnier@mailhec.net