Lessons from East and West

Returning again to the question of single ownership of so many big names – this also has implications for tenant mix, as an owner may want all 30 brands in a cluster. But that may not fit with tenant mix strategy. That will pose interesting challenges as the Middle East market moves forward. For now, though, there are all sorts of implications – it makes tenant mix more difficult to organise, it can impact on footfall patterns and, ultimately, it complicates the maximisation of performance of the shopping centre as a whole. Getting into turnover and understanding performance is critical.

Let's now turn the learning process on its head and ask what can the West learn from the East, and in particular the inflow of new tenants into the market from the East?

New concepts and brands that are emerging suggest that we need to look far more broadly when developing leasing strategies. The classy operations coming from other parts of the world range from a clothing brand retailer from the Philippines showing they can match the best and possibly even have broader appeal at better value, to a new generation of hypermarkets in India that leave many that I have encountered standing. India has also produced a knock-out electronics store. What distinguishes these operations is the presentation of merchandise in an engaging way, the store appearance, and the training of staff that translates into superior product knowledge and great customer service.

The West – and westerners involved in leasing strategies in the Middle East – need to embrace cultural requirements as well. Shopping trips more often than not involve whole families, so in addressing tenant mix we need to be mindful of catering for every member of that family—plus the chauffeur.

We have also found there is a strong desire for entertainment to be provided within new shopping centres – a desire much, much stronger than that to which we have been accustomed. So again, depending on how conservative or not each market is, we provide ice rinks, and fun centres, but the opportunity to be more innovative exists. In the process of evolving new shopping centres, we can learn a lot from each other. There is no one way that is always right.

Looking at lease terms – they vary, of course, but I don't see there being any real issues there. Frankly, there is enough variance across the markets – to illustrate, the United Kingdom has much longer leases than the United States. In South Africa, we operate on short-term and longer-term leases and all create some kind of a dynamic market. In the Middle East, smaller tenants have shorter leases and bigger tenants can negotiate longer leases. If any differences are encountered, it's not something that cannot be managed.

When it comes to the service charge levied on tenants, however, the market does not yet have a level of sophistication in terms of dealing with this. This too will evolve and in time there will be some consistency about it. For now, I don't think people have a proper handle on service charges. But perhaps that's not surprising because there has been an explosion of new development in recent times.

The level and speed of development has certainly posed many challenges for the Middle Eastern market. It's all a learning curve and as time moves on, it will evolve.