IKEA challenges SPG for urban Retail real estate

IKEA's Ingka Group is uniquely suited to take-on big CREs

While other global retailers go extinct before our eyes, IKEA is trying to buy-up premium properties in big cities around the globe.

Ingka Centres, which is part of the group that owns IKEA’s shopping malls business in Europe, China and Russia, is pushing-ahead with plans to enter an additional 45 large cities globally and in the United States, nearly doubling INGKA's current total locations.

By pursuing premium assets in major urban centers globally, Ingka/IKEA are in direct competition with Simon Property Group (SPG) and other CRE giants already digging-in by taking non-controlling shares in struggling retail stock.

It may seem a meatball strategy for a 'retailer' like IKEA to base its expansion plans on competing with aggressive CREs in the COVID-19 era, but Ingka has hard assets and knowledge in these targeted urban markets, and IKEA clearly understands how to feed and adapt its own global supply chains.

This is not the case for many other major urban retailers, which is why Neiman Marcus Group has recently filed for Chapter 11, Lord + Taylor is trying to liquidate  its stores, and JC Penney teeters on the edge of the abyss.

Meanwhile, IKEA prospers and executes on its growth plan, which based on a reading of the last few quarterlies is pretty much the same plan it had pre-pandemic. Ingka has been venturing beyond the suburbs and pushing-in to more urban centers for a couple years now -- a Planning Studio in Manhattan, a store in Paris a few steps from the Champs-Élysées.

More recently, Ingka has held talks to acquire old shopping malls, post offices and other physical assets that could be converted for IKEA's use. NYC, Chicago, LA, Moscow, Beijing . . . the idea is the same in each location. Build smaller, accessible urban stores that operate more like a multi-channel customer engagement hub than a traditional retailer.

While COVID-19 has somewhat derailed IKEA's aggressive urban strategy, the organization's diverse and expansive portfolio of physical assets, and successful reopening of its retail malls in major global cities seem to indicate recovery is underway.

As Brinkwire recently noted: "Over the past month, 15 of 38 malls closed due to the pandemic have gradually reopened, starting in China last month, with shoppers returning quickly in most locations . . . Footfall at (IKEAs) Beijing and Wuxi malls in April was at 67% and 81%," adding there was "little change to vacancy rates from before the crisis."

These more recognizable patterns of human mobility are essential in order for retailers to gain confidence in their recovery plans, and in order to understand how to adapt older assets and create new malls, which reckon to be as much community space as they are consumer destinations.

IKEA's existing urban footprints, strategically hedged retail exposure, and early insights into evolving changes in human mobility and consumer demand uniquely position the brand to acquire and stand new ground against any CRE.

Scott Valentine, Editor

Scott is a prolific editor specializing in B2B tech. His work has appeared with Forbes, the WSJ, Thomson Reuters, the Guardian, VentureBeat, the CBC and many more. Scott's clients include top retailers, analytics companies and investors. As a marketing and communications executive, Scott has been part of $1.5 billion in exits, and counting.