Unibail Rodamco And Westfield – Markets Don’t Really Work Quite Like That

6
1118

It’s entirely true that there’s money to be made even in a declining market. Being better at making a return on capital than the competition will see to that. And it’s also equally obvious that retail isn’t dead. It’s suffering some pressures from online, but bricks and mortar stores are going to be with us for some time yet. Still, there’s a certain unease here:

Christophe Cuvillier has the confidence of a man who knows he is on the home straight.

Last week, shareholders of Unibail Rodamco, the company of which he is chief executive, signed off on a $24.7bn (£18.3bn) deal to buy rival shopping centre owner Westfield. This week, Westfield’s shareholders will rubber-stamp a deal that has been three years in the making.

Unibail Rodamco is the largest property company in Europe, but few in the UK have heard of it. Its shopping centres – some of the world’s largest and most successful – are mostly in France, with others in Spain, Poland and elsewhere in Europe.

That’s the background, it’s this statement which worries a little:

Christophe Cuvillier: Retail is not dying. Only boring retail 
is dying.

Because that’s not quite how markets work.

As above there’s money to be made in retail, no doubt about it. People will continue to come up with concepts which will make them bundles. There will be interesting retail which gathers the crowds. It’s equally true that as online nibbles away at physical world stores it will be the worst which fail first. That’s all pretty obvious.

But if you’re a supplier of the space in which people do retail then it’s a little bit different. Yields and rents on all retail are going to be falling as that oversupply of retail space works its way through the system. We’ve 10% or more empty on the High Street these days. Entire malls and shopping centres are emptying out. Sure, of course, those owned by Unibail won’t. Of course not. But the price they can gain from them will fall as space opens up elsewhere.

The real point here being sure, retail will survive and exciting such do so well. But M. Cuvillier is not a retailer, he’s a supplier to retailers. Rather a different thing and one likely to suffer from the general sectoral decline.

6
Leave a Reply

avatar
3 Comment threads
1 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
3 Comment authors
bloke in spainSpikejgh Recent comment authors
  Subscribe  
newest oldest most voted
Notify of
bloke in spain
Guest
bloke in spain

Does that necessarily follow? As High Streets lose retailers they lose the critical mass of retailers needed to attract punters & do retailing. Lots of voids & rents fall. Retailers move to shopping centres which gain critical mass. Rents rise as stores compete to gain access to punters.

bloke in spain
Guest
bloke in spain

Does that necessarily follow? As High Streets lose retailers they lose the critical mass of retailers needed to attract punters & do retailing. Lots of voids & rents fall. Retailers move to shopping centres which gain critical mass. Rents rise as stores compete to gain access to punters.

jgh
Guest
jgh

He’s not a miner, he sells shovels.

Spike
Member

“Only boring retail is dying.” But selling, a year from now, exactly what you are selling now, will be boring. The key to success is continual innovation, reinvention, and an eye to local fashion; meaning good management. Retailing at large will be a mix of good and bad managers, so some will continue to get boring and die, especially when someone on the Internet is momentarily exciting. So the secular decline in bricks-and-mortar is relevant. Seconding Bloke in Spain, there is a broken-window problem too. Mall owners may decide they want good retail managers. The local summer league wanted professional… Read more »

bloke in spain
Guest
bloke in spain

I do have some personal experience of this. There’s some retailing we’d like to do. Put it in the town’s main shopping area, it might go. It might not. Stick it in the out-of-town centro comercial it couldn’t fail. It’s made for it. The critical mass thing. But the front end’s astronomical & the rents eye-watering. There’s no way there are going to be any but momentarily shuttered units there. (There are stipulations in the lease) The demand’s out of sight. It’d have to go way, way down before you’d see any gaps.

Spike
Guest
Spike

“Only boring retail is dying.” But selling, a year from now, exactly what you are selling now, will be boring. The key to success is continual innovation, reinvention, and an eye to local fashion; meaning good management. Retailing at large will be a mix of good and bad managers, so some will continue to get boring and die, especially when someone on the Internet is momentarily exciting. So the secular decline in bricks-and-mortar is relevant. Seconding Bloke in Spain, there is a broken-window problem too. Mall owners may decide they want good retail managers. The local summer league wanted professional… Read more »