Who will create the value of retail real estate tomorrow?

Investors, retailers, local authorities and consumers each have their own definition of the value of a retail “good”. And each of them calls it by a different name. Which is the best? None of them, and all of them at the same time.

It is the sum of all of the values – real estate, retail, urban and experiential – evaluated by each, that makes up the true value of the property, and not just one of them.

Two of the key stakeholder groups have begun shuffling the cards. For consumers and retailers alike, in 2017, any given retail site is now but one option among many others. The increased supply and the development of e-commerce have made consumers and retailers much more demanding, dooming unappealing sites to potentially irretrievable obsolescence.

When the consensus on the definition of value evolves, the way of creating it can or must be reinvented.

How? Precisely by reconsidering the role of each group to spark new dynamics. Here are a few examples among the many possibilities.

• Value and public action

In disadvantaged neighbourhoods, local authorities can give new value to their retail premises by creating a property management company that buys, leases and manages them. Its actions must be based on a clear, courageous strategy with political support, and must not simply look like subsidies in disguise. Here, both urban and real estate value are generated.

• Value and mixed programmes

Whether it involves restructuring existing sites or creating new ones, mixing retail, public services, culture and leisure is now a must. New business lines are emerging to design, build and manage these spaces in close, continuous cooperation between public and private players, which raises the usage (experiential) value of the site.

• Value and service rendered

Rents at shopping centres are the trade-off for the sales that retailers can make at the site. However, the digital era, by dissociating flows of people, goods and money, has side-lined the legal and accounting notion of “point of sale”. One day or another, landlords and retailers will end up working together to redefine the service rendered by shopping centres, and the way it is paid for, be it called “rent” or something else. This will have a clear impact on the financial value of the asset, not to mention on the business of property management companies.

These three examples, among others, show that in a fast-changing environment like the retail sphere, creating value also requires reinventing business lines and practices.