AIR - SUPPLY AN IRR CENTREPIECE.
The next generation "Mega Centres" or trade referenced "Big Gun" Shopping Centre re-developments are well underway, however there is much more to consider than the re-design of the "Food Court" or the prime locations of the prestige retail outlets.
The aim of the game needs to be centered on the direct revenue drivers that can be implemented to attract, retain and entertain patronage to support the multi million dollars invested in these re-developments. The continuous re-developments of Malls in Dubai should be a hint to the direction asset owners need to consider.
Centre owners are making investment commitments in most instances exceeding $500 million in single re-developments across Australia and optimizing returns must be a prime consideration for their shareholders. Air space is a most valuable asset of mega malls however utilisation mostly stops at the roof top car park! The air space is an under utilized and under valued asset with the potential to deliver high yielding "Internal Rates of Return" on these major property assets.
Essential Service Hotels commented, "In the highly competitive Hong Kong market the "Pacific Place" mega mall is supported by 3 high profile brand, 5 Star Hotels. The benefits of prestige brand hotels utilizing the air space above the shopping centre adds to the IRR and ensures the first up capture of the customer spend, on arrival"
Adding mixed-use hospitality components such as hotels or serviced apartment in the optimisation of the air space adds considerable value to the property asset directly through the increased capital value and indirectly through the contribution to the IRR. Additionally the benefits of adding commercial accommodation to the core business of retail centres are numerous with benefits that attract, retain and entertain patronage delivering revenue and creating prestige.
There has been minimal development in the hospitality accommodation sector over the past decade with high occupancies and optimum rates delivering asset owners high yields.
"What better utilization of the "Air Supply" than a commercial accommodation development. IRR is a moving target based on set internal formula, which can be enhanced by the extraction of extra value from the base asset .Not every mega shopping centre re-development will qualify for the inclusion of a hospitality component said Paul Glynn of "Essential Service Hotels" however the prime location of most shopping centres is usually the centre piece of the region. After a qualified Demand and Supply report has been completed the case for or against is obvious".
Every re-development is aiming at creating additional profile and prestige for their next generation centre and the addition of a prestige hospitality component is a smart strategy. "Choosing the relevant prestige accommodation brand to compliment a $500 million investment needs careful consideration. A prestige brand hotel will add intrigue conversely an inappropriate brand and the prestige is diluted and the investment downgraded".