Many retailers manage a large real estate portfolio with their stores, corporate headquarters and office space. Recent trends among retailers in Germany show that it is no longer just a matter of managing these portfolios, but some retailers are also investing in real estate outside their core business, such as apartments built on top of their stores.
It can be fairly profitable for retailers to upgrade space and invest in other real estate assets or in the booming residential market. This diversity forces retailers to rethink their real estate management strategy, streamline business processes and embrace digitalization. On the other hand, companies with large real estate portfolios from other sectors are also entering the retail market in order to develop new business areas and serve the needs of their customers.
Attractive leasing conditions as win-win scenario for SBB and its tenants
A great example for this is the SBB CFF FFS, Swiss Federal Railways. As Switzerland´s largest transport company, SBB is also one of the most important players in the Swiss property sector. To allow for the best possible experience, SBB does not only develop the railway, but also the railway stations and the adjacent areas with the intention of turning them into centers of economic and social life.
The goal is to increase the quality of time spent and service in these spaces. “The train station is the business card of a city”, explains Christian Eggenberger, Head of Real Estate Concepts& Acquisition Zurich and East Switzerland at SBB. “For us, the right mix of concepts is more important than high rental yields on each individual area. Therefore, we focus on revenue-based rent that start-ups, pop-up stores and regional bakeries can afford as well. We want our Swiss train stations to be modern and cosmopolitan, but with a strong regional influence that gives travelers a sense of home and well-being.”
After signing the lease, SBB works closely with their tenants to make sure they have all the tools at their disposal to be successful. For SBB, that is certainly not an end in itself as Eggenberger continues, “We offer highly turnover-linked commercial rents. Therefore, we measure the stream of visitors at the train stations closely, analyze the conversion rates of each store and seek the necessary dialogue with store operators, if there is a low conversion despite high foot traffic.”
Retailers in train stations should not be solely dependent on the revenue generated by passengers. Therefore, SBB decided to open the upper floors of the station to the public with co-working spaces, language schools, and health care centers on the first and second floor of their railway stations. Eggenberger explains: „Our intention is to give people, who live in the respective city a reason to visit their train station outside of traveling or commuting. If they find a cultivated, well-maintained area they feel comfortable in, with nice restaurants, lots of activities, and green outdoor spaces, they will spend more time there and help increase the revenue of the stores and restaurants.”
KPI measurement goes beyond real estate data
Technology plays a key role in this scenario as the SBB real estate management looks beyond typical real estate KPIs. “The fact, that our rental incomes are highly based on our store owners’ success, makes it essential for us to measure and include retail KPIs when evaluating our portfolio performance and the underlying strategy. We look at our occupancy rate and the rent per square meter as much as we care for our tenants’ revenue per square meter or the average basket size of their customers. Understanding, analyzing, and merging both worlds is key to our success in SBB´s real estate management”, Eggenberger says.
With a growing number of companies conquering new markets, and an ongoing merger of real estate usage types, the underlying technologies must be capable of measuring, processing and logically connecting KPIs from different business units. It is not enough to simply display the real estate portfolio and link it to the subjacent contracts. A company´s portfolio management, their expansion strategy division and business development must be able to merge their core business KPIs with their real estate KPIs to gain a 360-degree view on their portfolio performance. In retail, that means creating comparability of stores by connecting real estate related cost and performance indicators to retail related revenue streams.
If companies decide to increase their real estate performance with a 360-degree view of their business, they benefit from a software provider like SAP, that delivers intelligent end-to-end processes, focusses on the needs of all major industries and is capable of analyzing and deriving sophisticated action proposals. With the foundation of intelligent software, retailers and other companies can conquer new markets without the concern of missing transparency.
Get in touch if you wish to learn more about SAP’s approach to intelligent real estate management for corporate and commercial markets.