The Manufacturers are coming

Secret surrounding the new tenant at 62 Bahnhofstrasse, the famous shopping street in Zurich, Switzerland finally out

Michael Dressen MRICS, first published on LinkedIn in November 2018

At the end of November 2018, Swiss Life, the new institutional landlord of 62 Bahnhofstrasse, finally revealed the carefully guarded secret of who will be the new long-term tenant of that flagship store in the middle section of Bahnhofstrasse. After toy retailer Franz Carl Weber moved out at the end of 2016, the store was renovated and modernised and was used as a pop-up store by luxury winter sports brand Kjus and Swiss eyewear label VIU. Even before the pop-up stores entered, the retail spaces had already been re-leased on a long-term basis. The new tenant was not made public though. Swiss Life was supported by CBRE in the redesign of the retail space and in the international search for a tenant following the acquisition of the building and the refurbishment project from the previous owner in 2016. 

Now it is clear, who the tenant is:

It is South Korean car manufacturer Hyundai which will market and sell the independent luxury brand Genesis in the 3-storey retail space. The Genesis brand, whose cars are winning awards at international trade fairs worldwide, is still virtually unknown in Europe. Also in the pipeline, according to the Global Head of Genesis, Manfred Fitzgerald, are purely electric cars. The spectacular-looking purely electric Genesis Essential concept car was also unveiled at the New York Auto Show in spring 2018.

According to newspaper reports, Genesis also signed a tenancy contract at the end of 2017 for a 3,700 sq m store in the trendy meatpacking district of New York, from which it can be assumed that the new store on Zurich’s Bahnhofstrasse is part of a global strategy to open flagship stores simultaneously if possible. The opening date for the Zurich showroom has not yet been announced.

Manufacturers without direct access to customers risk, that their own products remain lost in the crowd

This example shows clearly that in future we will see new market participants in stationary retail, especially on shopping streets. Until now, manufacturers of cars and other goods, too, have marketed and sold their products either wholesale or through distribution partners, such as car dealerships. At a time when customers are increasingly moving online it is becoming more important to let consumers experience the brand, the philosophy behind the brand, and the product, so they can be differentiated. This works better in a flagship store, which is showcased in line with the brand philosophy and provided with its own staff, than it would be in a distribution partner’s premises, which sells other brands and where the manufacturer has no direct control over the design of the environment and the showcasing of the products so that it runs the risk that its own products remain lost in the crowd.

"At a time when customers are increasingly moving online it is becoming more important to let consumers experience the brand, the philosophy behind the brand, and the products, so they can be differentiated"

Michael Dressen

Another example of an equivalent strategy is Dyson. The technology company originally became known for its innovative vacuum cleaner. Today, the company founded by James Dyson in 1993 employs more than 7,000 staff and has a turnover of billions. Products are sold online or still primarily wholesale in warehouses and electrical stores, such as Fust in Switzerland. For a long time now, the company, which is still family-owned, no longer just makes vacuum cleaners, but also other products including hand dryers, hair dryers, humidifiers, and fans. In September 2017, James Dyson announced in an email to all staff that the company would like to bring electric cars to the market in 2020. Capital expenditure of around 2 billion pounds sterling is planned for this. Since 2015, Dyson has also opened its own flagship stores in top locations, the majority of which are initially in Asia. In Europe, Dyson opened its first store on London’s famous Oxford Street in the summer of 2016. Products are not only showcased in a stylish designer store, but are also fully explained, including the technology behind them. On the upper floor is a hair stylist offering complementary hairstyling, using Dyson hair dryers, of course. At the end of 2017, Dyson opened a flagship store on Fifth Avenue in New York and announced further stores.

Other technology companies, such as Samsung, Google and Microsoft, and even market participants coming from online retail such as Amazon and Zalando, have a similar strategy and are likewise opening showrooms worldwide, not forgetting Apple, which was a model for many of today’s new store concepts. Recently, Apple rolled out its new ‘town square’ store concept in Milan on the Piazza del Liberty, opening its spectacular, large-scale store located under the square in July 2018.

The rules of the game are changing rapidly

Consumers increasingly buy direct from brands, which develop suitable online and offline strategies for this. This is a challenge for department stores or specialist stores and it will bring about further changes to our shopping streets, as well as changing Zurich’s Bahnhofstrasse. For landlords of available retail spaces, this means that they will no longer only find traditional potential tenants from the retail sector, but must soon also speak to companies that perhaps still do not have any store of their own, but are poised to roll out an offline strategy to other distribution channels too. Such new market participants cannot always be found directly in the established local property or retail sector networks. Here, new contacts must first be made on both sides – often at international level – with both the landlords of retail spaces and the new market participants from the manufacturing sector, before they can roll out any new projects in the high street or shopping centre together.

In the search for the tenant and the complex negotiations, the Swiss CBRE Retail Agency Team was able to draw on the internal network of worldwide consultants, including the team in South Korea. In addition, it was crucial to broaden the horizons of the involved consultants, who are more specialized in retail, and to address sectors outside the retail industry that one would not initially expect to search for a location on one of the most prestigous high streets worldwide.