Innovating means changing value systems

Recent proposals submitted by retail real estate companies to local authorities are fairly indicative of their approaches to innovation. Some companies seem prepared to shake up their long-standing principles.

In 2017, not a single project was proposed that didn’t reinterpret the standard model of shopping centres. Local authorities demand something different, interlinked with the city, offering a better mix of uses. Developers are rising to the challenge… with more or less audacity.

In the bids we analysed recently for public development agencies seeking support during the consultation process, we noted that true innovators don’t settle for a mere make-over: they break their own codes to reinvent new ones.

From heresy to innovation

Breaking the old codes means, for example, designing a project with no anchor food store, or even with no clothing stores (at all). Or dividing the site into several distinct units to better integrate new usages, such as culture, in dedicated spaces. Not so long ago, any of these ideas would have been considered heresy by every expert in retail real estate.

These examples show that innovating represents a challenge for existing companies. But the challenge lies perhaps just as much in changing their value system as it does in activating their design labs or pool of start-ups.

In the hierarchy of retail real estate’s ‘traditional’ values, maximising rental income ranks right at the top, and has a direct impact on merchandising. Allowing less profitable activities, such as commercial or non-commercial services, can be justified if they add to the site’s attraction, the length of visitor stays or just to avoid vacancies. But, beyond a certain dose, these activities begin to conflict with the corporate value system. It is therefore unlikely that the owner company will of its own volition invent a project that revolutionizes the usage mix: at best, it will try to inject a bit of diversity into a project designed from the start – to the finish – as an essentially commercial development.

What goes into a genuinely innovative project?

Let’s look first at innovation in the mix of uses. A mixed project is simply a ‘collection’ of activities that need to function together as well as possible. If this synergy is designated as the most important value of the project, then the roadmap is obvious: it must be co-constructed with partners from each of the different worlds – retail, leisure, culture, tourism, services, housing… – and the real estate company must be prepared to rethink its standard practices. Opening up to other points of view, from other sectors, is the best way to start thinking outside the box.

It might sound like the obvious choice but it actually takes tremendous managerial commitment.

It takes commitment to organise the co-design of a project by partners of different working cultures, and to venture off the beaten track of retail real estate, especially when this will likely lead to further challenges in terms of income and management methods.

Jérôme Le Grelle
Chairman of CBRE-Convergences
Executive Director Retail CBRE France