Retail landlords look to leisure and lifestyle

Shopping centre landlords continue to transition their tenant profiles towards lifestyle, leisure and entertainment offerings to combat online retailing and meet their competition, finds the latest retail survey from JLL.

JLL’s 18th Retail Centre Managers’ Survey was undertaken in February across 106 JLL-managed retail shopping centres nationally.  The majority of centres were neighbourhood and sub-regional centres.

JLL’s head of property and asset management in Australia, Richard Fennell, says centres are shifting their offering to food, services, entertainment and leisure uses. Health offerings, gyms, medical centres, other medical-related services and insurance are expanding.

In some centres, the amount of food and beverage tenancies has “begun to create competition for existing operators,” Fennell says, while the “expanded offering” of supermarkets is lowering demand for specialty food retailers.

“Overall, food operators continue to drive tenant enquiry levels while online retailing continues to a key headwind for the fashion segment.”

Centre managers cited competition from other centres, followed by online retailing, fuel prices and the economic outlook as their main concerns this year.

Promotional discounting remains a major drag on retail sales growth, with prices for clothing and footwear having declined by 3.0 per cent in the year to December 2017.

Non-retail categories of household consumption continue to record the highest price increases, including education, health and housing, all of which are major components of household budgets.

Andrew Quillfeldt, JLL’s director of retail research, says the survey recorded an “improvement in tenant enquiry, albeit from a low base,” with centre managers “a bit more optimistic on the outlook for retail sales growth over the next 12 months”.

More than half (56%) of centre managers expect an increase in sales growth over the next 12 months, with planned refurbishments, tenancy profile changes and growth in the trade area driving improved trading expectations.

Total shopping centre annual turnover has improved marginally over the last year, but remains “generally subdued”, Quillfeldt says.

“Sub-regional centres recorded growth of 1.0 per cent in the year to December and just 0.2 per cent in neighbourhood centres.”