Time poor consumers driving shift to convenience-based retail
Time poor consumers driving shift to convenience-based retail in major Australian retail markets
| 27 August 2018
Time poor consumers are demanding more convenience-based retail in Australian CBDs, with banks, supermarkets and health insurance companies growing their footprint in major city retail precincts across the country.
CBRE’s latest Retail MarketView report highlights the ever-changing retail mix in Australian CBDs, with demand for prime space increasingly being driven by service-based operators amid strengthening consumer appetite for convenience retail
CBRE’s Head of Retail & Logistics Research, Kate Bailey, said CBD retail markets were adopting to the strengthening demand for convenience.
“The divergence between apparel and convenience-based retail is becoming more evident, with landlords capitalising on consumer appetite levels to provide more opportunity for banks, supermarkets and insurance providers in major markets,” Ms Bailey said.
“In Melbourne for example, St Collins Lane is embracing a new leasing strategy to refocus the tenant mix to convenience-based retail in a bid to attract more foot traffic and complement the existing apparel retailers located in the precinct. New retailers to the laneway include Leica, Franco Jewellers, Adolfo Dominguez and Swiss Emporium. “
CBRE’s Head of Retail Leasing for Australia Leif Olson said CBD retail markets across the country remained highly sought after from a range of retailers.
“There has been an upturn in demand from the service-based retail sector seeking space in prime and super prime retail sites, with Westpac, Suncorp, Woolworths and Optus all inking leases on premium space in the country’s leading shopping precincts,” Mr Olson said.
“The expansion of service-based retailers taking multiple sites in proximity highlights that the CBD is a unique and diverse retail market that can sustain further growth in the sector.”
“We are also experiencing a shift in demand with apparel, footwear and cosmetics looking from major super prime malls, to prime retail precints such as George Street in the Sydney CBD.”
The report showed in the year to May 2018, clothing and footwear retailing recorded strong growth of 3% - above the 1.6% recorded in the previous corresponding period. Despite this however, national CBD rents have remained flat for three consecutive quarters, with further growth in the second half of this year expected to be minimal.
On the investment front, transaction activity for retail assets totaled $2.2 billion in the second quarter of 2018, up 7.5% on the corresponding period. Year to date, retail transactions now total $3 billion – slightly below the $3.2 billion recorded in the first half of 2017. With several transactions in the pipeline, investment activity is expected to increase in the second half of 2018 – potentially driving further yield compression this year.
Shopping centres remain the most sought after retail asset, with transaction volumes in the second quarter of 2018 totalling $1.9 billion – more than double the previous corresponding period.
Victoria accounted for 77% of sales volumes in the quarter with 10 transactions, followed by Queensland with five and New South Wales with two sales.
CBRE National Director, Australian Retail Investment Properties, Mark Wizel said the stronger demand for shopping centre assets was partly attributed to a shift in offshore investor interest.
“We are seeing a major shift from Asian developers who have completed projects in Australia, opting to acquire retail investment assets as opposed to buying new development sites,” Mr Wizel said, highlighting the recent sale of Stockland Highlands for $43 million and Mornington Village Shopping Centre for $38.68 million – both of which sold to Chinese buyers.
“Asian buyers are reporting that their attraction to retail investment assets at present relates to stronger and more reliable income, when at least 50% of that income is coming from a major anchor tenant such as a supermarket. The underlying land value associated with a lot of retail centres is also a major drawcard.”
Mr Wizel went on say there continued to be pent up demand from local and offshore buyers – including both private families and funds – for larger assets valued at more than $100 million.
“The current marketing campaign for Burwood One Shopping Centre in Victoria demonstrates the strong investment interest in large retail assets, with more than 50 groups registering their interest in the asset so far.”
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CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2017 revenue). The company has more than 80,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.