The well-placed and managed sites survived, while those not adhering to the new era faced even more problems. At the same time, we also noticed certain new institutional players entering the market. Their know-how and experience can only be beneficial for a market moving towards the post crisis equilibrium.
I do not expect major movements during 2014. I do expect however, a higher demand from individuals, as prices reached their bottom, combined with the relative safety that real estate has to offer in a largely unstable investment environment. We shall not witness major investments, as our local market does not have the type of projects that will attract those investors currently active in our industry and in the region. In terms of major trends, I believe that we will see a gradual return of investments in manageable size real estate, given its low risk profile.
On the negative side and, probably, the single most important problem the sector has been facing, is the absence of the banking support. This is not only expressed by lack of or expensive financing, but also through numerous other time-consuming and inefficient administrative processes.
On the positive side, this period presented an opportunity to investors, developers, operators and service providers to put their house in order, sort out cost base, employ new strategies and direct their business in a focused manner on their respective area of expertise.
In our courtyard, we employ different strategies for each real estate segment in which we operate. For the retail segment (eg. Baneasa Mall), our strategy is focused on innovation. There is a three-fold implementation through introducing new retail concepts, enhancing the entertainment propositions within the center, and shifting to new marketing methodologies aiming at creating experience; we do that by employing all the new technologies.
For the commercial segment (eg office buildings and logistics), our strategy is focused on improving operations and cost efficiency. The market and demand equilibrium has resulted into significantly low rentals. Of course, location and accessibility differentiate each asset enormously. We adapted our rental levels and we have on-going projects to improve costs.
For the residential segment, our strategy is to simply wait, as long as the banking sector remains practically unreachable for the vast majority of potential buyers. At the same time, we have our plans and designs ready to be implemented when we see a shift in market signals.
I strongly believe that technology will be the most important change driver in our sector. This is true for all businesses. Technology is the base for innovation. Systems to monitor traffic, online channels to understand consumer behavior and interaction, operating platforms for energy efficiency are some examples of new technologies that can drive innovation. Mobile devices and When shopping centers become civic centers social media are good examples. On one hand, they have changed the shoppers’ perspective, establishing word of mouth as the most influential factor. On the other hand, they have altered the catchment area of a center as they create loyalty far beyond proximity.
Innovation is not the only business model to follow and certainly not applicable to all segments. We believe that innovation is applicable to the retail segment and it does provide better results. A shopping center is turning into a civic center. Innovative approaches allow you to view this business as one about many million people getting together in one place rather than just bricks and windows. In return, this opens up new revenue routes in addition to the traditional ones such as rentals. Nice example is the case of our alternative content proposals in our cinemas (theaters, shows, operas, conferences, etc) and also our “media sales” (off-screen and on-screen advertising), through which we have established significant new streams of income.
The recent past has taught us that no one can predict properly in this era. I believe that the evolutions in the European political front will drive forward the major European economies and Romania will follow. The focus point is the banking sector, which can either lift markets up or destroy them if the issues of this industry are not properly addressed in due time. I personally expect 2014 to be better than 2013, as we are very close to a turning point after 4-5 years of cumulative crisis. This progress will not be sharp and I do not expect it to significantly alter the business environment, but it will allow for an increased consumer confidence which, in turn, will fuel our business activity.