Within a matter of weeks after Fashion Street’s opening ceremony in 2008, the world had to face a terrible global financial crisis. However, Peter Csipak, founder of Fashion Street and its real-estate development company Immobilia Plc, with years of hard work managed to not only keep Fashion Street alive, but to actually make it the most beautiful and successful high-street of Budapest. This year, when Immobilia Plc would celebrate its 20th anniversary, dark clouds gather once again upon Fashion Street’s next jubilee; but if someone knows how to act locally upon a global crisis, it is Peter Csipak and his professional team. Now he tells about the current situation, the possible scenarios, the best and the worst strategies and contemplates wether a company could actually celebrate in 2020.
FS: Since the middle of March a new era has started because of the Covid-19 pandemic. How were the first couple of months during the restrictions on Fashion Street?
CSP: Obviously these sudden restrictions, the dangers of the pandemic and the following financial panic was a shock for me too. When we saw the first alarming signs, we started to come up with potential ideas on how to react to the crisis: we tried to depict all the best and worst possible scenarios. As we have already witnessed a global financial crisis on Fashion Street very closely, we had suspected the potential consequences of these lockdowns and restrictions.
Fashion Street however reopened again. How is the street compared to the times before the coronavirus?
It is not hard to see that the biggest issue on Fashion Street is the lack of tourists, hence those luxury hotels suffer the greatest losses, which built on foreign clientele. They are followed by restaurants and bars, because in the beginning of summer only the terraces were operational. And of course those stores suffered great losses as well, who also built on tourism. Every owner tried to attract customers with promotions and sales to minimise these losses, but unfortunately during June most of these stores operated with great minuses.
However, I think Fashion Street is in a quite lucky situation: given that it is a high-street located in the heart of Budapest as well as Europe, we are surrounded with great values here. And these values are important for Hungarians as well, who visit Budapest from other parts of the country.
Before the pandemic, around thirty-forty thousand people visited the street on a daily basis. How is the traffic now?
We didn’t measure it statistically, but by looking at the street – and as I actually have been living in this street in the last twenty years – it seems like ten to forty percent of the previous traffic. But now there are times which almost remind us to those peaceful times on Fashion Street before the pandemic.
Immobilia Plc managed the entire real-estate portfolio of Fashion Street. What kind of aid did the company offer to the stores?
Our first and foremost important decision was to give an immediate help to our tenants. We have informed all our tenancies that as long as the restrictions are on, we do not bill any rental fees to anyone on Fashion Street. We made this choise because
our business policy in Immobilia Plc is based on partnership rather than just a casual rentalship. And by doing this we ensured that the stores of our great global brands are not in jeopardy.
Fashion Street is the only shopping street in Budapest which is owned by a single company. How is this situation compared to the capital’s other shopping streets, which do not have this kind of singular ownership?
Naturally it is easer to make decisions when we can hold together as one company and help our partners. With decisions as such we can also define hte strategy of the Fashion Street brand.
Right after the opening ceremony of Fashion Street, the global crisis reached Hungary in 2008. Now, in 2020 the street has to face another crisis. How is the current situation compared to the crisis in 2008?
As now we can look back on the global financial crisis from a distance, it is much easier to learn from it. Thats crisis was worse in many ways: Fashion Street wasn’t ready for such a catastrophy and it took extremely hard work for Fashion Street to survive. Immobilia Plc was also an upcoming company: many buildings weren’t ready and there were still ongoing constructions when Fashion Street was officially opened to the public.
The greatest difficulty in this current situation is clearly this uncertainty: everything change by the week and we don’t even know wether this crisis will shape a V or a W at the end of the pandemic. However it is already clear that the market reacted slowly and daftly to the crisis back in 2008 – but now the actions are swift and intelligent, mostly because everybody very clearly remembers 2008.
What kind of strategies do you imply to make the best out of this situation?
On Fashion Street we need to protect a very precious portfolio.
A rental-tenant relationship is a partnership, hence we must think in win-win solutions. Which means that in a situation just like this both parties must share the losses.
That’s why we decided to freeze the rental fees: it takes what it takes and as long as it has to be, but we need to do this to share the hardship. We received wonderful feedbacks from both national and international companies, who highly appreciated Immobilia Plc’s sacrifice and acted as partners during the first months of the crisis. With these structural decisions we aim to protect and develop Fashion Street’s valuable portfolio and the Fashion Street brand.
Apart from freezing the rental fees, we decided – in alliance with the goverment of the fifth district – to lease the terraces for free on Fashion Street until the end of August.
Do you see other companies making the same decision as Immobilia Plc?
Honestly, when we decided on freezing the rental fees on the 28th of March, we already heard about pretty extreme decisions on the rental sector. There were owners who simply shook their shoulders and said: sorry, it’s collateral damage. Others decided to reschedule the payments but don’t actually dismiss them.
Compared to these, our choice was paramount and we have received plenty of positive feedbacks, including several global Western European companies, who told us that we are the first company in Eastern Central Europe who acted this way. They all highly appreciated this positive business policy.
People say that – due to healthcare and security reasons – retail is the past and online shopping is the future. Many companies closed thousands of their stores. How do you see the traditional retail’s position in Hungary?
Fashion Street is in a really special position because all global brands need flagship stores; these are those premium, high-end stores, which represent a luxury brand. Fashion Street has only flagship stores, therefore when a company starts to rationalize the number of its stores, it wouldn’t effect the flagship stores. Also, if you compare a shopping mall to a shopping street, the latter is more fortunate because shoppers can walk in open air and enjoy the beautiful atmoshpere of the city – not to mention that you do not need to wear masks on the street, only inside the stores.
Physical shopping in Central Europe won’t move permanently to online platforms, because shopping personally is impulsive, whereas shopping online is more narrowed to the necessary goods. We saw the statistics of the recent months, where shopping online has doubled during the lockdown (from eight to sixteen percent) – but now, as the stores are open again this number went back to the scale before the pandemic.
We asked our tenants about how online shopping worked out for them and they said that the numbers did grow indeed, but they weren’t actually ready to do the logistics of all the online orders.
Did you have to cancel any events on Fashion Street because of the pandemic?
As Fashion Street isn’t only about shopping, but about experiences too, we would have had many events on the street in these last couple of months. In 2009 we opened Fashion Street Gallery in Deák Palace, where we exhibit talented contemporary artists and designers; all these exhibitions were postponed to autumn.
Since 2004 we traditionally organize a party with Formula-1, which is the most important event on the street every year. Two years ago, when Fashion Street celebrated its 10th anniversary, we organized our most amazing birthday party with Formula-1, where celebrities such as Formula-1 pilot Lewis Hamilton and topmodel Barbara Palvin celebrated with thousands of guests the first ten years of Fashion Street.
This year we won’t have this party, and we also had to cancel several events on the street, such as sport activity days and healthcare days. I hope we can reorganize all these next year.
Immobilia Plc’s headquarter is the aforementioned Deák Palace, where several offices operate. How was the office life in the last couple of months?
Everything is almost back to normal in Deák Palace; in the last 2-3 months the companies based in Deák Palace strictly went to home office and are just starting to come back now.
In the office versus home office debate I see two possibilites. One is where companies realize that it’s financially beneficial to operate in home office – but the effectiveness of work is very questionable when someone needs to work next to his/her family. The other possibility is that if a company operates in an office again they need more space to maintain the healthcare protocols of distancing, they need more space for the same amount of people.
Comparing these two options I don’t think there will be extremities in the office market at the end of the day. Who valued to work in a modern and stylishoffice environment will continue to do so – but obviously they will pay more attention to issues like air circulation or larger office space – hence we do not calculate with great losses in office tenancies.
How did you personally go through the lockdown?
It was hard, because waiting makes me impatient. Fortunately I live in a residential green area, so I could spend a lot of time outside running and doing sports and also to think things through. With my workmates we had time to think about those solutions, which were necessary to survive the first wave – for which I’m thankful for my team and our financing bank.
I think we made good decisions: with somber looks, but with clear minds we managed the situation well and responsibly.
Many say that this pandemic might be a good chance to rethink our strategies and find new ways of operating compared to the times before Covid-19. Reset instead of restart. Do you see anything to be reset on Fashion Street or would you like everything to be back just like before?
Obviously nothing will be like before the coronavirus, because there are new regulations and laws. There are many solutions which were born after the crisis in 2008 and are still used today, for example the statutory declarations and deeds concerning evictions, cancellations and payment obligations, or even a band-rising system of rents in proportion to turnover.
These regulations aimed to secure both owners and tenants in a global financial crisis. I believe that this current crisis will give birth to many viable and sustainable solutions for both parties to profit from. But it’s hard to see it just now: these are still in progress. Maybe a year later it will be clear what are these viable solutions.
How long can Immobilia Plc help the tenants?
As a twenty-years-old real-estate development company we have reserves and excellent banking connections, so we can still help our tenants in this situation.
Naturally we only stretch as far as we can, but we feel that by dismissing 45 days of rental fees Immobilia Plc has shown its partnership policy in these difficult times.
Immobilia Plc is twenty years old this year. Fashion Street celebrated its 10th anniversary with a grandiose party – how are you planning to cheer for Immobilia this year?
It will be modest for sure. But it’s okay, cause now it’s not the time to celebrate, but to join forces together, to give help and to continue to be partners. And given that Fashion Street has all these three values, we will come out victoriously from this hard situation.