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Report of Executive Board of Directors

Focus on convenience

CONVENIENCE - Shopping centres and stand-alone supermarkets

The main focus of the Fund’s Convenience portfolio is on district shopping centres and standalone supermarkets with healthy catchment areas, together with assets in a rapidly emerging new retail segment, stores in high-traffic locations. Retail real estate with a functional range of goods (daily shopping) with a focus on convenience remains an interesting investment segment.

A healthy catchment area is the main factor in the success of any shopping centre or supermarket with a focus on daily shopping needs. The size – and health – of a catchment area can be affected by the regional economy, the local and regional demographic outlook and competing retail stock. A healthy regional economy guarantees employment and income growth, while demographic growth has a visible impact on a shopping centre’s potential market. On the other hand, new retail stock may lead to a serious reduction of the catchment area for existing supermarkets and shopping centres.

The Fund focuses on a number of additional factors that increase the level of convenience so prized by today’s consumers, an element that the Fund believes will become ever more important in the future. These additional criteria include easy accessibility, comfort parking, an effective tenant mix, plus the overall look and feel of the centre. The Fund needs to constantly monitor and respond to demographic changes, such as average age or household size, through the continuous optimisation of retail properties and their tenant mix. One essential part of the retail mix is one or two clear, complementary and well-positioned supermarket anchors, as these act as a major pull factor for convenience shoppers. Supermarkets have so far shown limited vulnerability to online sales and are virtually unaffected by other stores in their vicinity.

An effective retail mix with various specialist stores is another factor that makes shopping centres attractive to consumers. Due to market changes and the ongoing growth of online sales, the number of non-food shops in these centres will continue to decline in the near future. The Fund is therefore also focused on actively revitalising its convenience centres by increasing the average share – measured in square metres and in cash flow – accounted for by supermarkets and shops selling daily goods, and reducing the number of non-core units.

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