Telling your own story

Published in polis, Magazine for Urban Development

Interview with Christof Glatzel

Tell your own story
New ways in center development

Why did you commission a study on the future of the retail trade in SMEs?

We wanted to find out and have an independent authority assess whether the shopping centers in the SME segment are having the effect we always expected. The answers to the question of how the center development had affected the respective cities were predominantly positive and coincide with our experience. For each of our developments – we currently have around 30 centers under management – we conduct a before-and-after analysis.

This analysis examines the effects on the surrounding retail landscape and on follow-up investments and, of course, the development of the entire area. We were able to determine without exception that the effects are good. When something new emerges, many people think that this would only lead to the redistribution of what is there. Multiplication effects, a flourishing economy, saving, the desire to consume – all these topics are completely ignored in the public discussions. When we examine whether we can build a shopping center in a city, we immediately carry out sales analyses and discuss displacement effects, tapping rates and skimming rates. But the economy doesn’t work that way.

Why did you choose the medium-sized cities in particular?

They are currently the focus of project developers. In the large cities, the topic is largely dealt with.

What fundamental problems do medium-sized cities have to deal with?

The resentment may be greater here. Otherwise, the staff will never deal with these issues. It is a singular decision that they have to make once in their professional career and that a city may only make once in its history: shopping center yes or no? In medium-sized cities in particular, there are many small ownerships in the prime locations who do not invest anything, but in principle cannot do anything either, because the same mentalities take place to the left and right. As a result, entire streets become seriously stagnant. And when a project developer then realizes a shopping center – that’s usually 100-200 million euros – it’s fascinating to see what happens in the immediate run-up and what follow-up investments are made.

What is expected of the players in the municipalities?

As a rule, those who are at the helm want to make a difference and those in opposition are fundamentally against it. Otherwise it is completely different as far as the people involved are concerned. In a city, for example, we experience the city building council or mayor as a driving force. Often it is also the case that due to previous education and socialisation history a certain image of architecture and urban development is trapped, which does not make it easy. At this point one can only hold individual discussions and hope that the people are prepared to go this discourse with us.

From your point of view, what instruments can help to create trust?

The most important thing is that we personally make it clear to people in individual and group discussions and at events what the laws of an economically sustainable shopping center are. Over the past 10-15 years, the industry has understood that things cannot go on like this. The products today are much more open and completely different in terms of space and accessibility. That has to be made clear. To illustrate the effects of a shopping center, we bring together decision-makers from one city with decision-makers from other cities with whom we have already built a center. Then you can ask directly whether we have behaved fairly and kept all our promises.

Aren’t the balances of power unevenly distributed anyway? Which medium-sized city is still in a position today to actively develop its retail locations?

You can’t always say that. For example, the city of Ulm has clearly stated that it wants to see retail development near the railway station. It has bought the land, given it to a competition and fully controlled it. This is what a city that can afford to do – to buy the land at a higher price than it can subsequently transfer it back to an investor. But then it can also tell the investor exactly how it wants its product to be procured, with certain and restrictive conditions that reduce the investor’s profit and make project planning more difficult. However, the city is prepared to subsidize for this. That is one way.

…but a path that fewer and fewer medium-sized cities are taking?

I don’t know if it’s diminishing, I haven’t been confronted with this kind of process yet. The process in Ulm is the first one I know. But not every city can afford that.

Can it be assumed that project developments will be initiated much more actively by investors or developers in the future by looking for potentials within existing city structures and bringing them into discussion?

Both. However, the fundamental question arises as to what urban development possibilities a city has. A center can help to revitalize a wasteland area – for example, as in Cologne-Kalk. We were the first to invest in the large wasteland and thus trigger enormous follow-up investments. However, this does not only apply to the fallow land, all surrounding properties have also been renovated and upgraded. A shopping center can help cities to develop retail technology. In Mönchengladbach, there is an empty theatre in a central location in a prime location. Here we are rounding off further areas in order to realise a scale that allows a centre to be built. For a city like Mönchengladbach, this will bring an enormous upgrading. The centrality is increased and a lot more awareness of life is created. In this way, the city can once again live up to its character as a regional centre. A centre can also have a supply character for district centres or can also assume a hinge function and connect districts with each other.

What general conditions do you need for a centre, both quantitatively and in terms of location?

What is particularly relevant is the overall purchasing power in a catchment area to be forecast. Of course, the location is also of outstanding importance. Important questions are: How many potential customers from my catchment area can I inspire for the shopping centre? What purchasing power do these customers have? Can customers reach my location quickly and easily? Am I the only attraction or do I benefit from already existing offers? In addition, the availability of the property is of utmost importance. Basically one can say: 10,000 m² of property space should be the minimum. You first have to round this off together.

How do you proceed here?

Quite differently. Sometimes you have 20 to 30 owners. It is not only a nerve-racking fact, one is also incredibly susceptible to the fact that someone acquires blocking properties and thus destroys a project development.

Is it possible to say that you can get these technical qualities – which the municipalities usually cannot serve – under control on the investment side with experience and know-how?

Yes, but we need the support of the cities. A strong city puts a pre-emptive right statute on the site and keeps an eye on potential buyers.

In a certain sense, does this mean that you are taking on a further training role in the municipalities?

Yes, but I also have to learn what is relevant for the municipalities. Me and my staff also have to deal intensively with the location. This means that I have to deal with the historical background of the location and understand the urban relevance of the location. I have to find out to what extent I have to adapt to what I find or set new impulses. I must always be open to what the urban planning council, for example, brings to my attention. Because they also have to understand how a shopping center works and when it doesn’t. The most important thing is a completely open dialogue.

Are 1a locations a required necessity or do you have the courage to choose 1b locations?

You have to have that. The real estate industry always says “location, location, location”. An essential fact for the functionality of centers, however, is the size. We assume a property area of 10,000 m², possible full construction and three floors: Three gross floor levels of retail are 30,000 m², of which 70 to 75 percent are rental space and 50 percent are retail space (a shop always has a warehouse and a social room, which is not retail space but rental space). So if I have 10,000 m² of land, I can generate 15,000 m² of retail space from it. It should not be less. If you now build in a prime location, you could assume that you don’t need so much space there. But take a look at the small galleries on the Kö in Düsseldorf and see what difficulties they have in attracting people to the upper floors. You have to be big enough up and down so that people want to leave the street.

Back to the mfi once again. In recent years, the centers have evolved away from their monofunctionality and also served other requirements. How do you see these developments?

It will continue to go in this direction. Added value must be created that goes beyond mere shopping. I hope that the cities will understand that today it is no longer about “area A vs. area B”, but about “area vs. Internet”. Today, many things are ordered via the Internet. We must therefore create shopping worlds that provide people with quality of life and serve as meeting places. In the past, the church and the post office were big meeting places, today it’s the shopping centers.

Are you going down a new path with this?

We are now going down this road more intensively. We used to multiply a product over and over again, using high-quality materials, proven concepts and structurally very similar. Today, every center must tell its own story, incorporate the themes of design, quality of living and its own history, and be even more responsive to the space – these are the demands we have to meet today.

Do you see yourself as a partner for local authorities?

Yes, absolutely. I think the way we do project development is good. We say quite clearly: “If we build a center here, we are convinced that this is the optimal situation for you and that urban development will be promoted. But the b-centre, which you already have and which is already not working properly, will not be able to continue like this. The weaknesses will become even more apparent through our development. You’ll have to do something about that in the future.” Then we are completely open. I’ve been with the company for 15 years and I like to stay with it much longer because I think it’s ok and quite authentic what we do.

 

The interview was conducted by Johannes Busmann