Australian market attracts international retailers

Despite Australia’s sluggish retail sales, CBRE says there are still opportunities in the sector as low international brand penetration makes our market a magnet for global retailers.

While the industry recorded its concerns for retail in the latest ANZ/Property Council Survey, CBRE’s latest viewpoint, International brands still hunting Aussie locations, says Australia remains one of the most sought-after retail markets on a per capita basis.

Between 2012 and 2016, Australia attracted 139 new entrants to the market, accounting for seven per cent of the 2,000 international brand entrants in the Asia Pacific. Sydney and Melbourne ranked in the top 10 markets on a per capita basis.

CBRE says Australia’s favourable economic conditions – strong population growth, wealth, employment and tourism – support inbound expansion.

Australia also has a relatively low international brand penetration rate of 30 per cent in comparison to the 45 per cent and more found in Singapore, Hong Kong and the UK.

Alistair Palmer, CBRE’s national director of its retail services group in Australia, says the relative lack of competition in Australia’s retail market has driven strong sales productivity among international brands.

“By global standards, Australia’s market is relatively unsaturated, with a lack of products and services in some geographies meaning retailers don’t face the same competition.”

Palmer says this has been particularly evident in the fast fashion sector, with international brands such as Zara and H&M achieving some of their highest store sales performances over the last three years.

Forty-six new offshore retailers have set up shop in Melbourne since 2012, compared with 44 in Sydney and19 in Brisbane.

“While most global retailer activity to date has been in prime CBD strip locations or prime retail shopping centres, we are seeing more brands such as H&M open in more regional locations like Townsville,” Palmer adds.

Fifty-three per cent of new entrants were European brands, compared with 19 per cent headquartered in the United States.

Competition from international brands and innovation in the retail sector has coincided with the closure of roughly 10,000 retail outlets over the past five years, CBRE’s report finds.

Palmer expects continued department and discount department store rationalisation to create further opportunities for offshore retailers.

Brand entry is expected to continue, but at a slower pace, and CBRE estimates more than 1.2 million sqm of retail space could be sought by international retailers over the next five years.

Of this, supermarkets, homeware and department stores are seeking the largest space in both aggregate levels and average size, while fashion retailers are looking at the largest number of stores.

Palmer says the success of retail brands – both offshore and local – is dependent on their ability to adapt to an increasingly competitive environment.

“Riding on a strong international reputation isn’t enough – as we’ve seen with some recent casualties, it is imperative brands get the product right, at the right price point.”