Retailer Malls

In a previous post we highlighted how US-based investment giant Hines had recently put out a note on retail real estate prospects, which concluded that good and bad retailing had been incorrectly lumped together in many investors’ minds and that as an investor across multiple funds it was enthusiastic about investing in retail property again.

The opportunity has not been lost on some retailers themselves and two companies in particular have been actively buying up a number of malls and retail parks in three of Europe’s core retail markets: the UK, France and Germany.

The common denominator between two very different groups – Ingka Centres , the property sister business to Swedish retail powerhouse IKEA, and sports and fashion multi-brand group Frasers Group – is that they both have strong bank balances and additionally they have strong operational performance that has given them confidence in the future of brick-and-mortar retailing.?

As we have previously reported, MAPIC regulars IKEA and sister property business?Ingka Centres have been increasingly ambitious in the size and scale of their acquisitions. These include four acquisitions in Europe so far: Hammersmith, west London; Brighton, the established Italie Deux mixed-use centre in Paris and most recently one of Munich’s largest shopping destinations, Pasing Arcaden, from a subsidiary of Unibail-Rodamco-Westfield Germany. The retail-anchored, mixed-use development is located in the busy and densely populated Pasing-Obermenzing district, to the west of Munich’s city centre and Ingka Centres?Managing Director Cindy Andersen , who spoke at MAPIC last year, has been pivotal in driving the global expansion plan for the company’s real estate strategy.

She has overseen IKEA-anchored schemes of varying formats and sizes in China, India, Europe and North America, with the strategy in Europe and the US based around acquisitions rather than new development. In Asia, by contrast, the schemes have been new builds and far larger.

For its part, Frasers Group has a rapidly expanding UK property portfolio that includes the recently acquired Frenchgate shopping centre in Doncaster; the Overgate Centre in Dundee; Yorkshire outlet centre Junction 32; and The Mall Luton.

This October, it also completed the purchases of the Princesshay Shopping Centre in Exeter from co-owners Nuveen and The Crown Estate, the Fremlin Walk Shopping Centre in Maidstone, and The Olympus Centre retail park in Gloucester. Frasers Group has also recently acquired the St Nicholas Arcade in Lancaster's city centre.

While Frasers Group has declined to comment on its acquisition strategy, CEO Michael Murray said of the deals: “The acquisitions reinforce our commitment to investing in physical retail. Securing properties which serve as the primary retail destination for the community remains a top priority for us.”

Will the actions of Frasers and Ingka prompt a rush of other retailers looking to buy real estate? The answer depends on three factors. Firstly, they will need to be cash rich and looking at how best to deploy capital. Secondly, they will have to be highly successful with a killer brand (IKEA) or with multiple, successful brands that they can use to populate the centres (Frasers). Finally, the malls have to be great value deals making for a low risk acquisition.