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December 21, 2017

There is one bricks-and-mortar destination that isn’t going out of style in the age of online shopping: the mega mall.

Malls that offer shoppers the latest fashion trends alongside big cinemas, top restaurants and plenty of charging stations are proving resilient, even as shopping habits shift online.

The latest proof: Unibail-Rodamco, Europe’s biggest listed property firm, offering US$16 billion for Westfield Corp., which owns malls from London to California. The deal will create one of the biggest mall operators in the world.

Unibail already owns some of the largest shopping centers in Europe, including the Mall of Scandinavia in Stockholm, the Forum des Halles in Paris and Gropius in Berlin. Westfield, and the distinctive red lettering on each of its properties, is recognized by consumers the world over.

Both of the groups’ malls are leisure destinations. These types of malls “have everything, like high-quality store fit out, a trendy tenant mix, sophisticated technology and a broad range of dining options and entertainment,” said Andrew Quillfeldt, Director of Retail Research for JLL Australia.

This is a critical trait for landlords contending with expanding online competition. Done right, it improves the customer experience, and ultimately footfall, said Simon Rooney, JLL’s Head of Retail Investments for Australasia.

Major shopping centers “are well-positioned to compete against the e-commerce trend. These assets will continue to attract customers and tenants, and ultimately deliver attractive returns,” Rooney said.

Unibail isn’t alone in betting on this sector. U.K. property company Hammerson recently agreed to buy Intu for £3.4 billion. Brookfield Property Partners has bid $14.8 billion for the two thirds of GGP Inc. it doesn’t already own.

In Australia this month, two different AMP Capital funds bought a 50 percent stake in the Indooroopilly Shopping Centre in Brisbane, Australia. In a deal worth more than AUS$800 million, it was the biggest single-asset retail sale ever for the country.

Not all malls are faring well. Those that don’t offer a convenience option, or lack the bells and whistles of the bigger malls, could struggle as online competition encroaches on their traditional territory.

But major shopping centres that dominate an area will remain “a major focus for investors around the world,” Rooney said.

“Investors are recognising the long-term opportunities in the retail sector,” he said.

Click to read more about the retail investment landscape.

 

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Simon Rooney

Head of Retail Investment, Australasia, JLL

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