Nathalie Boyke

Gerald Grüll: “After the lockdowns we saw a quick and strong recovery in footfall”

Interview with Gerald Grüll, Head of Retail at IMMOFINANZ on the future of retail.


How badly has the retail park business been hit by the Covid-19 pandemic?

Corona has had an impact on most of the retail property tenants – but to very different degrees and with different long-term effects. Being the biggest retail park owner and operator in Central and Eastern Europe, we see that discounters in particular in all sectors have been very successful due to consumers‘ rising price-consciousness during a difficult economic period. After the lockdowns we consistently saw a quick and strong recovery in footfall and larger average purchase sizes. In 2020 the turnover in our retail parks was slightly higher than in 2019 in the overall portfolio, if lockdown days are excluded. This shows that the retail park concept also worked outstandingly during the pandemic. We can see that our focus on cost-efficient formats has proven to be relatively resilient to crisis.


Have differing government approaches to restrictions had different effects on the business?

Grüll: We have retail parks in nine countries throughout CEE and of course we were faced with very different local solutions and approaches to the pandemic, which included subsidies on the one hand but also restrictions on the other. We consequently worked intensively with our tenants in order to find solutions that would benefit all sides involved. One of our main advantages was our large portfolio, which includes big retail chains that are present in up to 70 or 80 locations throughout our different retail parks. With these tenants we entered into framework agreements on a head office level covering all locations and the various lockdowns involved. That helped us to simplify the process and find good solutions for all parties concerned.


In Poland, there has been a trend away from large malls towards smaller formats and the pandemic appears to have accelerated this. Is this the dominant trend across the CEE region and can we say that the current health crisis has only increased the speed of these changes?

Grüll: The general environment for retailers has changed due to the pandemic. One aspect is an increased emphasis on safety in regard to health and therefore a greater desire for fresh air.  We can see a shift in shopping locations towards open-air facilities or so-called open-air malls. More and more retailers want to open their shops in retail parks – with good reason. During the last year we have noticed that shopping centers have suffered from reduced demand, which is reflected in lower footfall and decreased turnover.

But this is not the case everywhere. In January this year, we also saw that the more remote shopping center locations in Romania had the same year-on-year visitor frequency, indicating that a certain level of infrastructure capacity will always be used by locals.


Despite Covid, retail park assets are still being bought and sold. Has the current crisis in retail affected prices and is now the time to buy or does demand outstrip supply?

Grüll: Certainly retail parks have gotten more attention than before the pandemic, as international investors are showing more interest for good reasons. Visitor frequency in our STOP SHOPs has quickly returned to the pre-crisis level and our retail formats include low rental and operating costs for tenants. Additionally, retail parks allow visitors to enter the shops directly from the parking areas in order to avoid contact points. All of this makes the retail parks more attractive compared to other investment opportunities in this area.

But generally speaking, the past year is not a good indicator for the future since government support, preventative measures in relation to unemployment and increasing government debt created an artificial environment for the industry that alleviated many economic issues for the moment. However, our STOP SHOP retail parks and their focus on discounters are considered desirable investments that are resilient to crisis.


How eager are investors (especially international investors) to get involved in this sector?

Grüll: Investors always look at yields, income and other financial indicators. Currently there is a lot of liquidity in the market and investment opportunities are rare in the commercial real estate sector. Therefore, the demand for retail parks has increased. For the time being, the CEE region offers the most attractive yields and prices in the retail business.  


How has the retail park format been tailored to meet the specific needs of the CEE market and are there significant differences between countries?

Grüll: STOP SHOP is our brand for retail parks in Central and Eastern Europe. They are located in catchment areas of 30,000 to 150,000 residents and offer a broad range of products with good value for money. We work together with well-known retail brands and offer efficient transport connections and extensive parking. Our retail parks concentrate on price-conscious “smart shoppers” who value easy accessibility and, especially in these times, direct access to the stores from the parking areas which allows for less contact with other people. Our concept has been designed to work across several countries and has proven to be a stable business model, even during a pandemic. That is why we are planning to continuously expand our STOP SHOP retail park portfolio. Our plans include an increase to 140 STOP SHOP locations over the medium term, whereby we intend to focus on our markets in CEE, Southeast Europe and Austria, with selective expansion into other Western European countries.


What do you predict the future of retail parks to be after the current health crisis passes?

Grüll: We have seen that retail parks have proven to be resilient to crisis and we believe this format has a reasonable future. One trend is the rise of e-commerce and the change in consumer behaviour. That’s why we started a pilot project to establish a channel for digital customer communication. We call the new app “STOP SHOP Wallet”– it allows customers to receive special promotions for their favourite brands directly on their phone. Obviously, this digital sales and marketing tool also benefits our tenants. Consumers have moved online and we have to connect with them wherever they are.

The issues of sustainability and product origin will also play a role because consumers are placing greater value on regional origin. This trend has also been intensified by the shortage of certain products from places such as Asia during the corona crisis.
And there is one constant aspect that will remain a factor in consumer behaviour:
the need for product discovery and human interaction that only happens when people go shopping in person.