Creative outlets: Julia Calabrese interview

McArthurGlen’s chief executive Julia Calabrese talks to Property Week about the company’s growth plans and how she thinks the thriving retail outlet sector will fare going forward.

Amid the doom and gloom of the retail sector, one sector is not just bucking the trend but breaking records.

According to Cushman & Wakefield, the largest European retail property deal of last year was in the outlet market: the sale of a portfolio of 10 European outlet malls in Germany, Spain, Italy, Portugal and Poland by the IRUS European Retail Property Fund for €1.28bn (£1.13bn).

Alongside this, several operators reported record sales and leasing figures. One was McArthurGlen, which reported a 13% increase in value to £4bn for the year to mid-November 2016 - the biggest increase in its 24-year history.

Already one of the largest operators in Europe with 24 outlets - six of which are in the UK - the company now wants to expand its empire through development, new acquisitions and significant extension programmes on its existing sites.

The woman leading the charge is Julia Calabrese, who has been at McArthurGlen since 1998 and its chief executive since 2003.

As she explains in an exclusive interview with Property Week, it is not a bad sector to be in when times are hard.

“[Outlets are] somewhat recession proof,” Calabrese says. “Customers come to save money and then, when the economy improves, they continue to come because they like the experience. When we come out of the recession, we gain a customer for life.”

Outlets are somewhat recession proof. People first come to save money and then we gain a customer for life

It is this philosophy that underpins the company’s strategy to increase its total retail space from 6.5m sq ft at the end of 2016 to nearly 9.7m sq ft by 2020. Six new designer outlets will be opened in five countries and eight of its existing centres will be expanded.

Last year, it grew the Serravalle outlet in Milan by 133,500 sq ft (50 stores) and the Noventa di Piave outlet in Venice by 73,200 sq ft (27 stores).

In 2017, the programme has been accelerated. McArthurGlen has acquired the 247,569 sq ft Rosada outlet in the Netherlands, bought a site in Malaga to develop a new outlet in partnership with Sonae Sierra and gained planning permission for a new project in Remscheid, Germany.

It expanded its outlets in Roermond, the Netherlands (123,800 sq ft, 50 stores), and Parndorf, Austria (59,200 sq ft, 20 stores), and opened a new centre in Provence, which was the first outlet mall in the south of France.

Meanwhile in the UK it gained consent for a £23m, 39,826 sq ft expansion of Cheshire Oaks and is set to break ground on a huge 100,100 sq ft extension of its Ashford outlet imminently.

Increased demand

“It’s definitely due to increased demand that we have been expanding these centres - demand that is partly coming from our customer base but predominantly from our brand partners,” says Calabrese. “In the outlet sector, a lot of the luxury brands - the Guccis, the Fendis, the Burberrys - are doing very well. The sports sector is also doing very well.”

For Calabrese, this marks a change in attitudes compared with when she joined the business in the late 1990s.

“The brands view it as a really viable distribution sector,” she says. “Earlier on there wasn’t that much service or attention focused on outlets; [there were no dedicated teams]. But now there are huge divisions running the outlet centres for the major brands.”

Ninety-five brands entered McArthurGlen outlets for the first time in 2016, taking its total number of retail tenants to almost 1,000.

We are trying to make things more engaging, more memorable, more captivating

As well as refreshing their brands, the new and extended outlets present McArthurGlen with the opportunity to up its game in terms of food and beverage and leisure, in line with the rest of the retail sector. “We are trying to make things more engaging, more memorable, more captivating,” says Calabrese. “We are expanding the food offer and continuing to focus on [providing in-centre entertainment].”

Across its portfolio McArthurGlen has hosted music festivals, installed a giant maze for children and held an outdoor yoga class for hundreds of participants.

Calabrese says this is one way of combating the customer flight toward online shopping. “They can’t experience that online: they need to come to us and see it,” she says.

However, she is reasonably relaxed about the threat the internet poses, saying there has been a “blending of the offer” between online and physical retailing and citing the online-only retailers choosing to open up bricks-and-mortar stores as a reason to be positive.

Retail tourists

Like its retail tenants, McArthurGlen has also embraced technology, using its entertainment events as a way to market itself on Facebook and Instagram as well as setting up a platform on Chinese site WeChat to engage with retail tourists from the Far East. “The idea is that they are communicating with one another and telling people about us - it is far more engaging than us using advertising to do it,” Calabrese says.

She adds that tourists have been a key target customer for McArthurGlen in the past five years and that their spend across the portfolio has increased by around 200%. This has been helped by extensive marketing from the company - which has representatives in Brazil, China, the Middle East, Russia and South Korea - to encourage people to visit McArthurGlen outlets.

The fact that marketing the European centres has become a global operation shows how far the outlet sector has come in the past two decades. “In 1998, when I started, it was a sector that really did not get a lot of attention and was seen to be competing with shopping centres, so it is interesting today to see how valuable the outlet sector has become,” says Calabrese.

Does this widening customer base mean that McArthurGlen could expand even further? “We are always looking for new opportunities, and if the right opportunity comes up we always consider it,” says Calabrese. “We are looking at our centres in the UK for other expansion opportunities as well as other opportunities in the UK that are out there today.”

If the wider retail doom and gloom is going to hit the outlet sector, it certainly hasn’t happened yet. And it seems it is well placed to weather the storm, should one roll in.

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