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Retailers and developers clash at ICSC national conference
30.09.2008 Retailers and developers from across the Baltic States clashed yesterday at a conference organised by the International Council of Shopping Centers (ICSC)'s Baltic States National Committee in Vilnius.
After a 10-year period of rapid retail growth across Latvia, Estonia and Lithuania, retailers and shopping centre managers are facing an uncertain future as customers reduce their spending in the current difficult economic climate.
With fewer customers spending less, rapidly rising common and utility costs, and the need to spend more on marketing and advertising to boost footfall, retailers are looking to their landlords, the shopping centre management, to help them by reducing their rents and providing increased marketing support.
Are Altraja, Commercial Director of Sportland International, which has shops across The Baltic States, Russia and Finland, called on the industry to work together. He said: “Shopping centre management must work more closely with their retailers to support them through this difficult time. If they do not, it is likely that retailers will either close stores or reduce their size within the shopping centre.”
Marcis Budlevskis, Director of Lease and Business Development at Linstow Center Management Ltd in Riga, Latvia and chairman of the ICSC Baltic States National Committee, which organised the conference, said: “The fundamental differences between retailers and their landlords were very evident at the conference, which was the first time that significant numbers of retailers and landlords had come together to debate the issues we are all currently facing.
“Landlords will always try to achieve maximum rental income from their properties, while tenants will use all the available arguments to reduce rents. The current state of Baltic economies has presented tenants with a new set of arguments, which will be used in negotiations with landlords in attempt to slash rents. It will be the task of each landlord to evaluate each such individual request. With the huge financial commitment and value of the shopping centres at stake, landlord’ will not be able to satisfy the demands of all retailers’, who are more flexible and to a certain extent, can expand and contract, according to the market.
“However, landlords will have to choose wisely in each individual case between accepting short-term rental discounts and refusing such support to retailer, thus, risking losses stemming from possible decisions of retailers to reduce the size of their shops or close some branches down completely. Therefore, to pull through the next few difficult years, we must all work together much more closely.”
Mihails Morozovs the Managing Partner for the Baltic States and Belarus at Colliers International, noted: “The conference brought together most influential industry leaders from the region to discuss the further trends and possibilities of the retail sector. At the moment it’s extremely important for all involved parties to support open dialogue regarding changes in the market, and take flexible position in terms of discussion future needs and plans. ICSC is the right platform to add value to this process, and take over the leading role in organizing round tables and seminars between the landlords, retailers, management and marketing companies.
“Despite surging inflation and the deteriorating financial standing of households which contributed to the slowing retail growth rates, the sector is still vibrant and full of new possibilities –introduction of new concepts and brands. The market has changed from the developers to the tenants. This made the competitions among retail centers become stronger. The existing retail centers with poor concepts and bad management will have to close or be forced to improve their concepts, the tenant mix and the commercial conditions to make them attractive both for the customers and tenants. Today the developers are making the decision to develop retail centers only in very good locations and when they have a clear concept developed by retailers.”
At the conference, representatives of retailers MOS Retail, Lindex, Stockmann, Kolonna Group and Apranga challenged shopping centre management companies, to meet their demands, which included freezing indexation of rentals according to rapidly increasing national consumer price indexes, switching from fixed minimum rent payments to turnover-based rents for at least 6-12 months, improving shopping centre efficiency and creating more effective advertising campaigns to boost footfall.
Ieva Plaude, owner of Kolonna Group which has 77 stores across the Baltic States, said: “We must all become more transparent about the way we do business and we are willing to share information with our landlords if they do the same.”
Rimantas Perveneckas, General Director at clothing retailer Apranga, which operates 90 stores across The Baltic including Emporio Armani, Max Mara, Hugo Boss and Zara, said: “We provide a lot of information to our landlords, including sales reports, but we get little feedback and the communication between retailers and landlords has been very poor. We should meet more frequently to develop trust and look at compromises to allow all our businesses to succeed.”
Marcis Budlevskis added: “Thanks to a vibrant economy in the Baltic States over the last ten years, we haven’t had to face these issues before. In these more challenging economic conditions, landlords and retailers have to work closely together looking for short-term compromises that will create win-win situations in the long run for both sides. Thanks to the full and frank exchange of views and opinions at the ICSC Baltic States conference, I am confident that this will now start to happen.”
Source URL: www.europe-re.com
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