Time-poor consumers drive shift to convenience-based retail
CBRE’s latest Retail MarketView report highlights the ever-changing retail mix in Australian CBDs, with demand for prime space increasingly driven by service-based operators amid strengthening consumer appetite for convenience retail.
According to CBRE’s head of retail and logistics research, Kate Bailey, “the divergence between apparel and convenience-based retail is becoming more evident”.
Landlords are “capitalising on consumer appetite levels to provide more opportunity for banks, supermarkets and insurance providers in major markets,” Bailey adds.
CBRE’s head of retail leasing for Australia Leif Olson says 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.
“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,” Olson says.
“We are also experiencing a shift in demand with apparel, footwear and cosmetics looking from major super prime malls, to prime retail precincts 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 three per cent – above the 1.6 per cent recorded in the previous corresponding period.
Despite this, 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 totalled $2.2 billion in the second quarter of 2018, up 7.5 per cent 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 tallying $1.9 billion – more than double the previous corresponding period. Part of this growth is attributed to 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,” says Mark Wizel, CBRE’s national director for Australian retail investment properties.
“Asian buyers are reporting that their attraction to retail investment assets at present relates to stronger and more reliable income, when at least per cent 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,” Wizel adds.