Do we want to live without shopping centers?

Over the past four decades, shopping centers have taken on an essential role in the lives of visitors, tenants and shopping center investors. After Portugal’s Integration in the EU, there was a desire to have a greater offer of products and services in modern, comfortable and convenient spaces, with a very wide range of choices. This desire was answered by shopping centers. These spaces came to respond to the needs of consumers and, at the same time, gave tenants and investors the possibility to expand their business into new areas with great customer adhesion.

This structural transformation driven by shopping centers has resulted in profound changes in shopping habits, creating a positive correlation between shopping and leisure and has turned shopping into one of the most important daily activities for a significant number of people.

By their own nature, shopping centers have become a solution in which everyone wins: visitors for confort, convenience and comparison based choices, compared to other points of commerce; tenants for the business opportunity, volume of customers and organization of the offer; shopping center investors because they guarantee long-term returns on their investments. Thanks to the work done by all participants in this market and by the companies that manage these spaces, a win / win / win scenario has been created that is based on a delicate balance.

Any decision that affects this balance, specially the elimination of the fixed rent, can, in the medium term, lead to the decline of shopping centers and affect everyone involved: in the short term, the investors will suffer significant losses, but inevitably the tenants and customers will also be affected in a near future. The economy will also be affected. We have moved from paradigm based on cooperation and balance, where all parties were gaining something, to a competition model where the purpose is to gain an advantage over the other party, without concerns for the future.

This is not the first crisis facing this sector. In the difficult moments before, market players were faced with the need to find solutions that guarantee everyone's sustainability and it became evident that collaboration between the parties is essential. In the previous economic crisis, the support given by Shopping Centers to tenants was essential to keep many stores open, and reached an approximate value of 400 million euros nationwide. During this pandemic crisis, the owners returned to grant support and lack of remuneration adjusted to each case and the reality of each tenant, reaching a level very similar to the support granted during the previous crisis.

One of the main reasons for the success of shopping centers is the balance of risk and reward given by fixed and variable remunerations, allowing tenants to be encouraged to obtain the greatest possible success and, with this exceptional performance, the owners are able to obtain an additional profit based on the value of the variable remuneration. This balance is the opposition of the traditional lease, where tenants' performance has no relevance. Significant changes in any of the remuneration components can have an unthinkable impact on the delicate ecosystems that are shopping centers and, consequently, due to their representativeness, on the country's economy.

That is why we must ask ourselves, "Do we want to live without shopping centers?" In this difficult phase, while we look for solutions to support the economy and prevent a prolonged crisis, it is essential that cooperation and protection of common interests are in the center of all decisions taken, in order to prevent the answer to this question from putting at risk the future of visitors, tenants and investors.

The success of shopping centers is always the success of its tenants.

Published originally at Jornal de Negócios