Ikea's shopping mall arm plans US entry in major play

Stockholm

IKEA'S shopping malls business, one of the world's biggest, is looking to enter the US in the next couple of years and is in talks to snap up central properties in major cities.

Gerard Groener, the managing director of Ingka Centres, which has 45 shopping centres in Europe, Russia and China, said his company was in several negotiations for inner-city real estate. New York, Los Angeles, San Francisco and Chicago locations are high on its wish list, he added.

It may appear an unlikely time to be planning expansion, as Covid-19 lockdowns in North America, Europe and elsewhere have deeply depressed the retail market, with little certainty about how and when consumer demand will rebound.

However, the pandemic also presents opportunities in the squeezed commercial real-estate market. "We are in a very active search," said Mr Groener. "Maybe it's a good time to buy now. I'd say it's more a buyers' market than a sellers' market currently in the US. Hopefully we can be successful now, with the timing."

In the US, Ingka Centres would be taking on mall giants such as Simon Property Group, General Growth Properties and Westfield. Mr Groener said that Ingka Centres was looking to enter a total of 45 large cities across all its existing markets and the US, alongside Ikea stores.

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

The company is in talks, which are at various stages, to buy properties such as old post offices, department stores or existing malls to convert, he added.

Ingka Centres is a division of Ingka Group, which owns most Ikea furniture stores worldwide. Its centres, all anchored by an Ikea store, operate under brands such as Mega in biggest market Russia and Livat in China.

In January, it made its first acquisition of an existing mall location - that of Kings Mall in London - which Mr Groener said would hopefully open in April 2021.

The company had overall tenant sales of 6.7 billion euros (S$10.3 billion) last year, with big tenants that include Inditex's Zara, H&M, Fast Retailing's Uniqlo and Auchan. Over the past month, 15 of 38 centres closed due to the pandemic have gradually reopened, starting in China last month, with shoppers returning quickly in most locations. Mr Groener said that in China, footfall at its Beijing and Wuxi centres in April was at 67 per cent and 81 per cent respectively of the levels seen a year earlier. In Wuhan, the epicentre of the outbreak, visitor rates were slower to pick up.

He added there was little change to vacancy rates compared with before the crisis, when Chinese centres had waiting lists and vacancy rates in Europe were around 4 per cent.

Where closures have been called upon by authorities in various countries, Ingka Centres has relieved all tenants from paying rent altogether. In the subsequent restart phase, some tenants have negotiated temporary rent reductions, he said.

Centres in Russia, Italy, Portugal, Spain, Britain and Slovakia remain temporarily closed. In Russia, he said, the plan was to reopen gradually from May 15, starting in St Petersburg.

Ingka Centres, which had 480 million individual visits in the year till August 2019, is working on three new out-of-town centres in China and two in India. Ingka Centres' move into city locations comes alongside furniture giant Ikea's strategic shift towards smaller - albeit more accessible - inner-city stores with more digital and other services. REUTERS