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LOVING THE ONE YOU’RE WITH

Unable to build new malls, owners opt to rebuild instead

BY SUSAN THORNE

	The construction of a major new shopping center is a relatively infrequent event in Western Europe, where most of the available sites are already occupied and tight development restrictions limit the number of new projects at others. As a result, many center owners are making the most of the properties they have, through renovation, expansion and revitalization.

“Europe is completely different from the U.S., because most retail is concentrated in city centers,” said Arno G. N. Ruigrok, director of research at AM Development, a firm based in Gouda, the Netherlands, that operates in 13 European countries and builds about 10 centers a year. The firm is currently renovating its Musikwartier center, in Arnhem, the Netherlands. “There’s not too much opportunity anymore to add a lot of square meters,” Ruigrok said. “It’s all about adding quality.”

The advancing age of many West European shopping centers is important, given that most of them date back to the 1970s and ’80s. Even in Spain, where the retail real estate industry is relatively young, the original center stock is now approaching 25 years old.

Counterclockwise from top, before and after photos of the following renovated centers: Hammerson’s Italie 2, Paris, fixed up in 2001; ECE’s Nova Eventis, outside Leipzig, Germany, currently under renovation; and Rodamco’s La Part Dieu, Lyons, France, redone in 2001.

“Roughly all our French portfolio is concerned by the problem,” said Jean Barbieri, retail management director at the Paris office of Rodamco Europe, which owns 67 malls in 10 European countries. “The centers are between 20 and 30 years old, look outdated and need to be refurbished, at least as a kind of defensive marketing.”

All Rodamco’s centers are regionals. The firm’s renovation efforts involve, in France, the 1 million-square-foot La Part Dieu, Lyons, completed in 2001; Velizy 2, a center in the town of Velizy, 10 kilometers (6.2 miles) south of Paris; Parly 2, in Versailles; and Villeneuve 2, in Lille. In Spain, it’s Glòries and Barnasud, in Barcelona; La Vaguada and Parquesur, Madrid; and Los Arcos, Seville.

Retail real estate is regarded as an attractive investment vehicle in Europe at present, notes Peter Todd, European retail director at the London office of Jones Lang LaSalle, so it is likely that strong players will continue to buy and refit properties. He cautions, however, that such opportunities vary from country to country in number and type. The value of Italian shopping center properties is particularly high at the moment, Todd says, while Spanish prices are softening because of extensive new development there. Good-quality French centers are in demand, but refurbishment of Dutch or German centers is harder to justify because of declining retail sales in those markets. “The issue there is how quickly you need to achieve your payback,” he said.

Neumarkt Galerie, Cologne, a former Hertie department store, is now a mall.

Despite sluggish retail sales Germany, Europe’s largest national market, offers some opportunities to acquire and remodel underperforming or partly unoccupied shopping centers, says Peter Fuhrmann, president of Düsseldorf-based shopping center consulting firm Peter Fuhrmann Consulting. Fuhrmann says he is involved with two such projects (he declined to name them) in central Germany. One example is Düsseldorf-based Brune Consulting’s €180 million ($219 million) conversion of the former Hertie department store in Cologne into the Neumarkt Galerie, a three-level, fashion-oriented center with 172,192 square feet (16,000 square meters) of retail.

These renovations highlight the priorities of mall design today, and one of the biggest changes to yesterday’s shopping centers is the amount of light being brought inside.

“In the 1970s and 1980s, the philosophy was that you should have a dark mall so shops could be bright and stand out,” said Wolfgang R. Bays, CEO of Brune, which specializes in leasing, development and property consulting. “It was based on the dominance of the merchandiser, but today we consider the whole center ambience, which should be bright, friendly and well connected to the street. The purpose of this, of course, is to extend the customer visit.”

Bays says he has put those principles into practice in reorganizing the two-year-old, three-story MOM Park Center, in Budapest, Hungary, which was previously made up of several unrelated small corridors. The mall is being opened up and made more customer-friendly with a new central space and improved access, plus an architectural plan that creates sight lines between different levels.

Rodamco’s Barbieri says his company’s renovations are replacing the introversion of older downtown centers with more welcoming exteriors and interiors — entranceways are being enlarged, exterior signage improved and common areas made more amenable with such accessories as seating and greenery. At La Part Dieu, Rodamco brightened the interior with 16,000 square feet of ceiling skylights, for example.

Because space is precious and nonextendable in most European projects, designers have to work smarter to achieve an airy, open effect.

“We don’t want to lose [gross leasable area], so we have sometimes cut out terraces or columns to give an impression of greater interior space,” said Barbieri.

Space for public events and promotions is assuming greater importance in newer shopping center schemes. One of the largest European renovation projects currently under way is Hamburg-based developer ECE Projektmanagement’s Nova Eventis. This radical €170 million refurbishment of the 1991 Saale Park, outside Leipzig, Germany, has a strong focus on leisure, entertainment and services. It will also have such updated features as three elliptical spaces for events, a glass canopy joining two parallel mall concourses and an extensive water park and ice skating track, among other updates.

In downtown centers, space constraints require a different approach to entertainment. Brune’s Bays cites the Ko Galerie, in Düsseldorf, as a good example of what small centers can do. The fashion and lifestyle center uses its atrium and other public areas for promotions (such as a recent Harley Davidson exhibition), poetry readings and concerts; the audience sits on the central staircase.

The merchandise mix often gets changed with a renovation. In 2001 Hammerson revamped the 642,000-square-foot Italie 2 center in Paris with a greater concentration of leisure and trendy urban fashion, acquiring 20 new tenants in the process, recounts Sonia Duarte, a spokeswoman at Hammerson’s Paris office.

The Bullring mall in Birmingham, England, was rebuilt from scratch.

On the rare occasions when center expansions are possible, they can lead to a host of improvements.

“Often we need an extension to finance a pure renovation,” said Gontran Thüring, leasing manager with Ségécé, Paris. “Or an extension can be an opportunity to get space for dynamic new actors like H&M and Zara.”

Today’s mall redesigners are also trying to make their projects better reflect the surrounding communities — something that received scant attention in most first-generation mall conceptions, when projects stuck out like sore thumbs. La Part Dieu takes inspiration from some of the surrounding region’s architectural features, such as the traboule (the city’s celebrated narrow pedestrian passages) that is given a modern reinterpretation in the circular staircase at center court.

Though there is much that is despised about older mall architecture, not everything gets thrown out in a renovation. Rodamco has discovered through customer surveys that after 15 or 20 years the original center has often become a well-loved community institution. Barbieri says that at La Part Dieu, this has been respected with a new center court fountain that resembles an earlier fountain. “We feel that when we refurbish a center,” he said, “we should try to keep its soul, and possibly not change everything.”

However, there was no love lost on the old Bull Ring Shopping Center, a mall built during the 1960s in the center of Birmingham, England, which became a poster child for inner-city blight. Developers tore the whole thing down and last year opened Bullring, a $700 million retail project that, despite its radically modern design, pays homage to its surroundings and the city’s history, architects say. As such, it might be seen as one of the more conspicuous reconstructions of recent times — it restored a city’s center.

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