Jovana Cvetkovic, Director for retail and office development, innovation, and technical operations at MPC Properties spoke at this week’s REBEC real estate conference in Serbia about their real estate developments during the pandemic, the challenges they faced, and their future plans.
Jovana Cvetkovic has been working at MPC Properties for seven years and is currently in charge of development, innovation, and technical operations for the company’s retail and office assets.
MPC Properties is one of the most experienced real estate development companies in the Southeast Europe region, operating since 2002. MPC has developed over 30 projects and its portfolio includes 133.5K sqm of retail space and 96.5K of office space. Projects in Belgrade include USCE Shopping Center, BEO Shopping Center, Mercator Center, Usce Tower One and Tower Two, Navigator Business Complex, and many others.
Additionally, MPC manages five assets, of different retail formats, in two other Balkan countries with approximately 65K sqm of GLA.
What projects have you finalized during the pandemic?
Let us start with our most challenging and interesting retail project during Corona time, BEO shopping center.
MPC bought the land of a ruined mechanical factory in May 2017 and immediately proceeded with changing it from industrial use to retail. It was clear that this location in East Belgrade, with its proximity to the highway and major intersections, was crying for a new retail destination.
It all began with just a piece of white paper and a vision to build a shopping center. Our inspiration to give the center an identity, a “face” and ambiance came from the target customers themselves, as they were the ones who knew best what they wanted and needed. The outcome of the market study was to make a modern but warm interior, with an attractive and diverse retail offer, complemented by good entertainment, gastronomy choices, and convenient parking. Our goal was simply to create an overall pleasant ambiance that excites the customers and makes them want to stay just because they feel good.
Since there have been a lot of new retail project openings in the last couple of years in Serbia, our strategy was to make our center stand out from all other existing centers in Belgrade.
The center is located on the corner of Vojislava Ilica and Mis Irbijeve streets, covering a GBA of 130,000 sqm and housing over 140 global and regional brands. The mall stands out with its innovative architectural concept following the latest global retail trends, featuring a lot of open spaces, wide corridors, plenty of natural light, and greenery.
BEO shopping center has spacious rest areas, a unique food court with two terraces, 13 modern restaurants, and a safe and protected entertainment area with a multiplex cinema offering eight high-tech screens.
BEO Shopping Center has been recognized on an international level, as we have won two prestigious International Property Awards in the “Best Retail Architecture” and “Best Retail Interior” categories. This is very important to us because its shows that we regularly use international benchmarks and standards to set up our local real estate goals.
In addition, we had two more openings during Covid time in Belgrade, a business tower “USCE TOWER 2” as part of our USCE multi-use complex, and an office building “Navigator Business Center 2” as a part of our Navigator Business center complex.
How has the pandemic affected the leasing process and relationship with retail tenants?
The COVID situation was absolutely unexpected, not only for us but for the whole world. We followed the events in China from the very beginning and formed a “Crisis Team” as soon as January, to predict potential scenarios and act in advance, always focusing on risk management with maximum efficiency.
Teamwork was what characterized our system, and the situation we encountered in the spring only proved this. We were online 24/7 and available at all times to our tenants, contractors, security services, authorities, and all other partners.
Proof that we created a well-coordinated system was the fact that we managed to finalize the construction of BEO Shopping Center on time and opened it successfully in June 2020 at its full capacity. We managed to coordinate all tenants and their subcontractors to open their stores on time without any delays or postponing, which was an amazing success considering that the equipment and goods were coming from all over the world at a time when everything stopped.
Also, during lockdowns, we provided rent and marketing charge reductions for all tenants in our retail assets. After the lockdowns, we reduced the rent in order to sustain the effort ratio to an acceptable level for both parties, while taking into account the standards for effort ratio by categories and store sizes. In this way, we demonstrated that we are good partners for our tenants, as we saw the situation realistically and understood that their survival was essential for both parties.
In the centers, we complied with all COVID safety measures, which required good coordination as the measures recommended by authorities were sometimes changing on a daily basis.
Flexibility and maximum efficiency helped us to successfully overcome the challenging period. It confirmed that we are the absolute leaders in the Serbian market when it comes to real estate management, in all of its aspects.
I would especially like to underline that, during the Covid period, we also welcomed in our centers’ newcomer global brands to the Serbian market, This includes ‘Peek and Cloppenburg’ in BEO Shopping Center and ‘Kiko Milano’ in USCE Shopping Center.
Also, during the Covid period, we generally refreshed the tenant mix of our malls with the globally renowned retail groups such as LPP, Inditex, H&M, Super Dry, Starbucks, and so on.
Finding positive things during the pandemic period is not easy, but I would only say that, although we suffered, our agility and adaptability helped us overcome this crisis, while minimizing its negative effects on our company, employees, and business partners.
Which retail sectors recorded an increase in sales during the pandemic?
The pandemic had an impact on the decline of turnovers for most of the tenants. This is mostly due to the decrease in footfall, the lockdowns, restrictions on the number of people allowed in stores, and shortened working hours during 2020 and the 1st quarter of 2021.
Also, restrictions generally affected shopping habits. People were coming to the malls less often, while on the other hand, they were planning their shopping better and spending more money per single visit. Hence, the results for 2020 were certainly lower than in 2019, however nowadays, as measures and the whole pandemic situation is gradually relaxing, we feel an improvement and return to the business level we had before the pandemic.
In general, one may say that pharmacies and drugstores recorded the best performance in the entire portfolio, followed by supermarkets and sports categories, which is logical as sports facilities, outdoor activities, and generally, the facilities contributing to wellbeing have become more popular with people.
How long did restrictions last in Serbia?
Last year in Serbia, the centers were closed for 54 days in total (a month and a half), and this year for 29 days (almost a month), which was a big blow for all of us. Last year, the period with shortened working hours was continuous from July to December, and this year from the beginning of the year to April.
Retail Parks had fewer restrictions than shopping centers due to their outdoor concept, however, they also recorded a decrease in business operations compared to the pre-Covid year as they also had restrictions on the number of visitors they were allowed to let in the stores.
What is the future for retail and shopping centers?
The pandemic has greatly created changes in consumer habits and retail in general. Coronavirus has accelerated the digitalization process and contributed to greater competition.
However, the maturity and quality of e-commerce in Serbia is not yet a serious threat to physical stores. On the other hand, physical shopping is changing, as retailers and shopping centers are now focused on enhancing the shopping experience, bringing in innovations, and implementing digital technologies at points of sale. It will be interesting to see how the physical and online retail market will develop and merge together.
In general, time is passing faster, information is more accessible than ever before, people’s needs are greater and more complex. Consumers’ habits have changed to include planned purchases, time savings, settling more obligations in one place, and also a greater desire and need for entertainment and leisure.
The industry of shopping centers itself is moving towards creating more interesting destinations and turning them into community hubs that meet consumers’ needs which do not exclusively revolve around shopping and consumption.
What we see as our biggest advantage in this story is that we are an absolute leader in the segment of offline shopping, with the longest experience and expertise in the region. We are currently focused on the integration of this particular segment with online customer service. Our strategy now is to create a synergy between the online and offline market segments.
Our strategy is to redevelop our existing retail assets into multipurpose centers. We have already done this with our USCE mixed-use complex, comprising of USCE Shopping Center and two office buildings with a modern park in between the towers next to the intersection of two rivers.
Also, we are developing a mobile app for our shopping malls to keep up with consumer demands. This new digital solution will create a synergy between online and offline shopping, which has proved to increase impact and customer loyalty.
Do you have any new projects in the pipeline or acquisitions?
In 2021 we will be focused on the opening of our prestigious commercial facility project Tri Lista Duvana (TLD).
TLD Belgrade is a modern, ‘A’ class business building located in the heart of the capital city at the intersection of Kneza Milosa Street and Bulevar Kralja Aleksandra, close to vital state and city institutions, including the National Assembly of the Republic of Serbia and the Belgrade City Assembly.
This modern business facility has nine floors and a two-level underground garage, offering 8,300 sqm of rental space. TLD Belgrade offers its tenants great flexibility in layout, taking into account all of their needs and providing the best technical and design solutions. An additional advantage is that the interior itself includes specially arranged zones for relaxation, with the aim to provide employees with quality entertainment and rest.
The ground floor of this business facility will have modern conference halls to provide the users with additional support in work and comfort in executing daily tasks and meetings.
Also, TLD Belgrade will house luxury cafes and restaurants with direct access from the most accessible intersection in the city. TLD Belgrade is also recognizable by its impressive panoramic view of the National Assembly, Pionirski Park, and Nikola Pasic Square.
The plan is to complete the TLD Belgrade project in early 2022.
Also, we are in the process to acquire a land plot in New Belgrade, for a new office building development, which we can discuss in more detail in the upcoming period.
In general, Serbia has still a huge potential for new developments. The market is driven by strong economic figures of growth, and as long as those numbers remain higher compared to alternative markets, the office and shopping center industry will continue to grow.
The real estate industry is very dynamic and is permanently reinventing itself with expansive growth. MPC Properties is one of the leading real estate companies in Serbia and will take an active part in the years to come.