22 January 2015 – Australian
retail rents are beginning to rise across the board after a prolonged lag to
CBD markets are leading the charge, with
CBRE’s Q4 Australia Retail MarketView highlighting 3.7% growth in national
rents in 2014, underpinned by a significant 10.7% rental hike in NSW.
Rental growth is also emerging in the regional,
sub regional, neighbourhood and large format sectors according to CBRE’s Head
of Research, Australia, Stephen McNabb, with regional face rents tipped to grow
by 2.6% this year, followed by 2.8% growth in 2016.
“Expectations for rent growth are improving across most parts of the retail
sector reflecting the improved trading conditions and sales growth seen in 2014,”
Mr McNabb said.
“Retailer profit margins have fallen
in the past two quarters due to rising competition and the weakening AUD but
are still relatively high after a period of consolidation and cost cutting. Retailer business confidence, whilst modest,
is improved on the weak levels of 2013. Fundamentals are now more supportive of
rental growth and this has driven stronger investor interest in the retail
A key driver of CBD rental growth has
been the continued entrance of foreign retailers, which has led to increased
demand for prime CBD space. This was highlighted by the Q4 opening of French
luxury cosmetics retailer Sephora and Uniqlo, both in Sydney’s Pitt Street, and
Swedish mid-range fashion retailer COS opening its doors in Elizabeth Street
CBRE National Director, Retail
Services, Alistair Palmer said; “Foreign retailers remain the headline story in
high street retailing as their store rollouts continue to gain momentum.
Australia’s high consumption per capita relative to other economies, with
expectation of further growth, is garnering strong interest from foreign
retailers as they reach saturation in their home markets and look abroad for
Mr Palmer said the new offshore
entrants had vertically integrated supply chains and/or sheer economic of scale
at all stages of the supply chain which gave them a competitive advantage in
terms of higher gross margins, allowing them to service higher occupancy costs
and secure prime CBD locations.
“As a result of this, many domestic
retailers are being priced out of prime locations. We expect domestic retailers
to either be willing to pay higher rents or relocate to secondary locations.
Domestic retailers are also repositioning and reinventing themselves to target
niches between the mass and high-end luxury markets such as the fast growing
‘affordable luxury’ segment,” Mr Palmer noted.
Another 2015 trend is expected to
involve more leasing activity from luxury foreign retailers as opposed to fast
fashion retailers, who have largely secured their CBD flagship stores.
“A few dozen luxury food and beverage
retailers are searching for suitable opportunities in 2015 and beyond,” Mr
Foreign retailers are also increasing
targeting regional shopping centres, which will help support rental growth and
redevelopment activity in the regional sector.
CBRE’s Retail MarketView highlights
that regional centre rents grew by 1.1% nationally during 2014, with a
highlight being the 5.5% growth recorded in Victoria.
The report also highlights that
regional centre managers are increasingly focused on changing their tenancy mix
to boost performance and respond to both the behavioural changes of shoppers
and competition from online retailing.
“In the medium to long term we expect
a much larger proportion of centre GLAR to be occupied by leisure and retail
services – potentially 20-25% in top regional centres – as landlords look to
enhance the customer experience and combat online retailing as well as attract
tenants who can support retail growth and whose services that cannot be bought
online,” Mr McNabb said.
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2013 revenue). The Company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 350 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website atwww.cbre.com.au.