When business experts need technical expertise

 by Markus Reinert, Chairman Executive Board, IC Immobilien Holding AG.

Typically, shopping centre managers are commercial business graduates. In all likelihood, they initially applied for jobs involving a range of commercial tasks and requiring experience in marketing, retail and customer acquisition. Demonstrating enough business expertise, these jobs would be theirs for the taking. However, in modern shopping centre management, there is one major problem – this long-established job description has long since been overtaken by reality.

It is a leftover from an antiquated idea of how large-scale retail real estate works: Bricks are laid upon bricks, a few pipes and cables are installed and, to put it simply, there you have it –the centre is complete. All you then need is the commercial expert, who comes in and makes sure that tenants come, and stay. The only place you’ll find this model now is in the history books. Today’s shopping centres have technically complex digital structures, around which actual buildings are designed and built. And this poses very different – technical – challenges.

A centre’s management still has to take care of the commercial side of things: the leases, the effective marketing, delivering the right retail mix and building relationships with retailers. But this is no longer all that is required to run a shopping centre and generate attractive returns year in, year out. The continuous optimisation of operating costs, for example, is certainly a highly-relevant topic when it comes to delivering long-term success. It’s a simple equation: A reduction in operating costs means that even an increase in basic rents will be met with acceptance by tenants. And if a centre’s owner decides to put any rental increases on hold, even after having achieved a reduction in operating costs, then that’s a significant competitive advantage for the centre and its management. The technical optimisation of the building’s structural elements offers a variety of ways to increase profitability. In contrast, the commercial approach, which involves the optimisation of leases, is far more one-sided and a much harder sell.

On the one hand, there are more than enough electronic administration systems that can help commercial property managers to reduce both personnel requirements and costs. On the other hand, it has so far proved almost impossible to manage the technical side of things via IT systems, which, in this respect, certainly have a great deal of catching up to do. Even though the technical optimisation of a shopping centre has a crucial role to play in a centre’s success in the commercial property market, there is no structural assistance that managers can call upon. This proves: Personal technical expertise is indispensable in the field of shopping centre management.