BBJ Top Real Estate Executives

Slowly but we are over the pandemic. How do you see the retail sector in Hungary?

After a long, grim time shrouded by the pandemic, we see indeed a gradual coming-out, but the aftereffects of this period will still be visible in the long run. We remain astute, well prepared in case of an aftermath.

The retail sector has grappled with several challenges – decline in turnover, visitors’ number, basket value – as an effect of the epidemic in early 2020, yet the decline was restored by the end of 2021, partially due to the openness of investors, the pent-up demand and willingness of the visitors to purchase and enjoy live experiences. Now we are facing new challenges, the unwelcome return of the war, surging energy costs, labour issues.

What does it mean particularly in your shopping center?

We have taken a calculated view on the situation and regarded the challenges as an opportunity, forging new knowledge out of the difficulties. The wave of vacancies generated by the pandemic – which we managed to keep below 3% even in the most severe period – provided us with the prospect of rethinking our leasing strategy and implementing new plans.

We have learned and developed significantly on the operational side, and we will continue to integrate this knowledge into our operations, increasing efficiency, security, and the ability to react quickly. In addition, we could capitalize on the restrictions on the FM side: we were able to make several investments in the building that would have been more difficult on top of the normal operation and the high number of visitors.

In terms of the business performance, although the number of visitors is still approximately 10% lower than the peak year of 2019, we can recognize an increased conversion ratio, in certain cases reaching outstanding turnovers, with some business profiles exceeding the figures of 3 years ago.

This is also coming as a proof of our well-conceived marketing strategy, as it is clear that we are reaching targeted visitors with higher purchasing power through our tenant mix and communication. On the one hand, the missing number of visitors can be explained by the transformation of office needs and the perpetuation of hybrid work, as the employees of the nearby office buildings were part of our regular visitors. The other target group is made of tourists, who have not yet returned to their usual volume, although the statistics are reassuring – compared to 2019, the number of guest nights increase fourfold compared to the same period in 2021.

How the past period influenced your leasing strategy? What are the goals for the next 1-5 years?

Westend plays a central role in the retail ecosystem. As I mentioned, we always find opportunities in challenges. Vacancies created throughout the pandemic were used to generate an optimal tenant mix and to support the strategic approach – horizontal compartmentalization of the building levels by relocating existing tenants and optimizing the clustering.  Openings have also been created to attract brands’ new concepts and to deliver space for appealing flag-ship stores.  

Leasing-wise, the biggest challenge for the next years will be to cater to the ever-changing customer habits. The business premises will also be transformed, more emphasis will be placed on showroom-type business areas and spaces with combined functions, where in addition to the traditional store space, different services will be available. Consumers are longing for the in-store shopping experience that goes beyond the action of buying.

The advancement of digitalisation is also having an impact on the development of leasing areas. With these changes in place, we are already planning to outline more alternatives for the future so that we can offer immediate solutions to current or upcoming needs.

What are the biggest challenges in the operational/FM part?

While the greatest challenge during the pandemic was continuous reform, we are planning with completely new challenges for the future. Already there is a great uncertainty in many areas due to the war situation, it is already clear that property management will be immediately affected by the rising energy prices, a stagnant supply of raw materials and labour shortages. We ensure safe operation with thorough and conscious planning.

What kind of developments do you offer to the visitors?

Since long, we consider the mall not as a complex of shops, but as a community space. This is especially important for Westend, as we are talking about a mixed-use property, and the location and the diverse range of visitors justify the widest possible range of services and stores. The community function also echoes in the physical space design. This aspect guided us, among other things, in the redesign of the food court. Renovation works on Westend’s food hall will begin later this year, and visitors will be able to make use of the newly refurbished area and restaurants selection in 2023. Visitors will be able to choose from numerous features and layouts at the Food & Friends branded yard, whether they are coming for a business lunch, a meeting with friends, or just eating out.

We are also constantly developing the facilities available on the Westend roof garden, which awaits those wishing to relax, have fun, play sports, or just work – the community space in Budapest. Workplace, the mall’s community office space, will reopen soon. At the same time, several common areas are also being remodelled: we have recently handed over our renewed parking, and  other areas will be soon given a new design as well.

ESG is a hot topic on the real estate market. How does it appear in Westend’s life and on which fields?

Over the past decade, the ESG movement has gone from a nice-sounding idea that many corporations were just tackling with to a critical metric. The topic of sustainability, social responsibility and transparency has increasingly defined how we operate. The new framework is more conducive to creating comparability in the market for industry players. We treat it as a priority, as compliance with international standards is essential in terms of financing. These principles are also widely accepted by our owners and management and -have been forming our strategy and corporate culture over the past years. Our group of companies is currently conducting an ESG audit and defining specific objectives, where we focus mainly on reducing emissions and saving energy.

Of the three ESG metrics, shopping center owners have the most direct control over the environmental factor of the equation. A deeper dive into those emissions reveals that heating, cooling and lighting make up most of the energy usage. We have achieved outstanding results in these areas over the past 3 years. Due to Capex investments, such as the installation of LED lighting and the replacement of obsolete coolers, we have achieved almost 30% energy savings. And we are setting even more impressive goals in the future.