Management techniques and instruments
Catchment Area analysis
Corio actively manages its shopping centres on the basis of its knowledge of the centres’ catchment areas. We make use of consumer counting systems in our large and medium sized shopping centres and use turnover data from retailers for analyses. For the more qualitative dimension of a catchment area, Corio conducts surveys (tenant and consumer satisfaction surveys) and runs consumer panels through internet. In addition, qualitative data such as household profiles provide insight into the types of households in the catchment area, which in turn helps identify the kind of customers visiting the shopping centre. The different types of households are identified on the basis of factors such as household members, employment, income and education, the type and location of the house and whether it is rented or owner-occupied. Other data, such as family background, religious faith, use of media, values and mentality, are also considered. Such data are analysed in-house. These analyses provide in-depth knowledge of the shopping centre and its catchment area. Combined with the in-house shopping centre management formula Corio has developed, a shopping centre’s quality in terms of design, tenant mix and marketing can be matched effectively to the primary catchment area that it serves. This approach supports long-term growth in the value of the portfolio.
Measuring shopping centre quality
Corio has defined a set of criteria to assess the quality of individual shopping centres in the portfolio on a continuing basis. This assessment includes six qualitative aspects aimed at identifying the current quality of a shopping centre in relation to its market and nine qualitative aspects aimed at identifying the shopping centre’s potential quality. These aspects are similar to those used by the shopping centre industry generally, such as the criteria of the International Council of Shopping Centres (ICSC) for the European Shopping Centre Awards. Aspects taken into account in the ‘current quality’ score include catchment area quality, location quality, building quality, competitive position, tenant mix quality and legal aspects. Location quality and catchment area quality are considered the most fundamental. The relative location is determined by the position of the shopping centre with respect to other competitive centres and to potential consumers, and together they define the potential catchment area. The absolute location is determined by accessibility and attractiveness of the immediate surroundings. The catchment area is the consumer base and, therefore, the income base of a shopping centre. It is essential that both the physical shopping centre design and the tenant mix are aligned with this consumer base in terms of both size and quality. In addition to ‘current quality’, Corio has determined ‘potential quality’ criteria. These criteria include the possibility to refurbish and redevelop and to expand, as well as criteria for improving the shopping centre environmentally and commercially.
Development activities
The insourcing of (re)development activities is in line with the trend in the real estate market towards increasing vertical integration between property owners and developers. It is also prompted by strategic reasons. Corio believes that combining the (re)development and investment activities will enable it to respond more swiftly to (re)development opportunities in the real estate market and to create sustainable shopping centres with features and a tenant mix that suits the consumers in the catchment areas of these shopping centres. Corio believes this will be attractive to long term investors. By insourcing the overall (re)development project management, taking the responsibility for the concept and design of the shopping centre and the leasing, Corio believes it can control the project better and monitor risks more effectively. Corio does not take any zoning or construction cost risks in its (re)developments. To eliminate these risks Corio subcontracts the construction of (re)development projects and does not acquire land before the required zoning is in place.
A change in the Dutch tax regime regarding FBI’s which came into effect in August 2007 allowed Corio to create its own property (re)development business. This business was set up at the beginning of 2008. A precondition for an FBI to undertake (re)development activities is that activities are limited to Corio’s portfolio. Corio is not allowed to engage in development business for third parties. At this point in time the larger part of our pipeline still consists of turnkey projects, shopping centres that are developed by external developers under Corio’s supervision. The number of turnkey projects is expected to decrease over time. We recognize three stages of development: the sourcing of the opportunity, the design and development phase and the execution. The first and last phase are organised locally. The design and development phase however we choose to run more centrally, using all available knowledge in the company under the direct leadership of the CDO (Chief Development Officer).
Source: Annual Report 2009, Chapter Overview & Strategy, page 28 (PDF, 13.679 kB)
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