Real Estate

Ikea plans €5.8bn real estate investment

Ikea plans to invest €5.8bn over the next three years in real estate developments built around retail stores, despite the sector’s struggles with the transition to online sales.

The company’s property division, Ingka Centres, currently owns €9.5bn of real estate but aims to increase that by more than half, including €3bn of new mixed-use city centre developments with Ikea stores in Europe, Asia and North America.

Gerard Groener, global managing director of Ingka Centres, formerly known as Ikea Centres, said the group had researched the property market and customer behaviour, resulting in “a whole new way of thinking around shopping centres”.

This includes “the integration of stores into meeting places” and “opening up the blue wall [of Ikea stores] so it is part of the centre and not a separate building”, he said.

Ingka Centres — a subsidiary of Ikea — is already a landlord to other retailers and leisure groups. But it sold off 25 retail parks around Europe for €900m in 2017 and will now focus on city centres as well as acquiring Indian properties and expanding its Chinese holdings.

By 2025, it expects to own 70 locations in 15 countries, up from 45 now. These will include offices, hotels, community spaces and “Ikea-inspired apartments”, as well as stores.

The new projects will also include €2bn of urban mixed-use schemes in Changsha, Shanghai and Xi’an in China, and refurbishments of some existing properties.

Ingka Centres said the investment programme “demonstrates the long-term confidence Ingka Centres has in the right kind of retail-led mixed-use real estate”. It will be funded through cash flow from Ingka Centres and other divisions of Ikea.

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Ikea has signalled a shift away from its traditional strategy of positioning stores on the outskirts of cities, in favour of smaller, city centre shops. It is experimenting with formats including a kitchen showroom in Stockholm and bedroom store in Madrid.

Mr Groener said Ingka Centres, which was created from multiple subsidiaries in late 2014, was monitoring the shift to online sales.

But he added: “If you have the right locations, physical locations will always work. Apart from having a strong online presence, it’s a matter of finding the right markets.

“We want to be closer to our customers living in major city centres who are less and less likely to have a car — we want to reach out to them and make our home furnishings accessible to them.”

Mr Groener said Ingka Centres was looking at 30 “mega cities” to target initially, with the aim of buying sites to redevelop, such as post offices or old department stores.

He acknowledged that prices for city centre real estate are “quite high” but said: “When it comes to city centres it is of course repurposing of brownfield [land] and I would say investing in a downtown area is lower risk than investing in suburbs or out of town.”


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