The financial crisis put the brakes on many plans for new retail developments, but those refurbishing or expanding existing centres are seeing growth. Ragtrader reports.
With more than $3 billion worth of retail developments in Australia due for completion this year, you could be forgiven for thinking that the global recession has in no way diminished our love for new shopping centres.
You would be wrong, but only slightly. Local and international investment in new retail developments has been completely flat this year, as investors remain extremely cautious and risk-averse in the current climate.
Few major new developments have been announced in the more traditional hotspots for fashion retail, the capital city CBDs. It is the so-called sub-regional and neighbourhood centres that have been the most buoyant, the majority anchored by supermarkets that, unlike fashion retail, do not rely on discretionary spending.
All indicators, however, point to a recovery. According to the latest figures from the Australian Bureau of Statistics, household consumption and retail spending are up, as is consumer confidence. The only possible downer is the continued uncertainty over unemployment growth, which restricts retail expenditure.
Nathan Clark, national director of retail for Colliers International, says we have definitely seen the worst of the global downturn. “Regional sales figures that have come out recently and in the previous quarter have shown confidence in the market that things are picking up,” he says.
“We are dealing with a number of national and international retailers at the moment who are looking to expand into well-located positions. While they are cautious about where they are going, they still do have expansion plans in this country.”
Rhon Levin, CEO of retail for Lend Lease in Australia, agrees. He says the global financial crisis did not discriminate and any entity with interests in the property sector suffered in the volatile economy, but the signs look good.
“Short-term fundamentals are quite sound,” he says. “However, there are some issues to look out for in the medium to long term, including downside risks in the labour market.”
Levin says local and international investors in retail property developments are still cautious, and he agrees with Clark that it is the neighbourhood centres that are receiving the most interest from investors.
From a retailer’s perspective, there is also a certain amount of caution about expansion plans and about renewing existing leases. Some landlords are attempting to lure new tenants and encouraging existing tenants to renew by offering rent-free periods, Clark says.
His company represents a number of major retailers and has found that many are currently a bit hesitant about renewals, and are asking for either capital expenditure on the shop or centre, or a rent-free period. If the landlord is asking for extraordinary rent increases, retailers are not hesitating to say no.
While massive new developments or redevelopments such as Chadstone Shopping Centre and Westfield Doncaster are scarce this year, for retailers looking to fill a niche that is slightly underserviced, both Clark and Levin agree that neighbourhood centres are the place to look at the moment.
“It’s really about where the (population growth) corridors are through residential expansion,” Clark says. Boosting neighbourhood shopping centres up to sub-regional size by offering a strong convenience factor is certainly a growth industry, he says. Do that, Levin says, and the investors, and tenants, will come looking. ¦
Hot spot snapshot
NSW
• Frasers Broadway (Sydney central): The redevelopment of this iconic Sydney site is soon to begin. Full development will take 10 years.
• Narellan (Sydney outer west): Growth area in Sydney’s west, near Camden and Campbelltown. Some leases available, some works still being planned.
• Double Bay (Sydney inner east): Hit by the construction of nearby Westfield Bondi Junction, Double Bay is heading even more upmarket. There is a brand new development about to be marketed by Colliers, while leases are available at the Cosmopolitan Centre at the Stamford Hotel.
• MidCity (Sydney CBD): Four-floor, 50-store redevelopment by Lend Lease in Pitt Street mall. Leasing is progressing well with stage one to open in early 2010.
• Erina Fair (NSW central coast). $40 million redevelopment of supermarket-led precinct nearing completion, more works planned for wider retail activity.
• Birkenhead Point (Sydney inner west): factory outlet centre to open October 21, leases available.
Victoria
• Westfield Doncaster (east Melbourne): $220 million redevelopment due for completion this year.
• Chadstone Shopping Centre (south-east Melbourne): Luxury retail strip managed by Colonial First State to open in November. Chanel, Gucci, Louis Vuitton and Prada confirmed.
• South Wharf (Melbourne Docklands): Leases available at this new DFO, with a redevelopment of Spencer Street Centre planned. DFO to open in October/November 2009.
• 206 Bourke St (Melbourne CBD): Quiksilver signed as anchor tenant. Deal agreed for unnamed international fashion retailer on adjacent corner. Building to be completed in near future.
• Caroline Springs (western Melbourne): $52 million redevelopment of town centre nearing completion.
Queensland
• Robina (Gold Coast): Redevelopment complete.
• Marina Mirage (Gold Coast): Recent facelift complete.
• Soul: (Surfers Paradise): $100 million ground floor retail precinct opening on to both Cavill Mall and The Esplanade due for completion next year.
• Caneland Central (Mackay): Permission granted for $235 million redevelopment, containing the first Myer store in the Mackay region. 100 stores to be leased.
• Flinders Mall (Townsville): Permission granted for redevelopment.
Western Australia
• Enex 100 (Perth CBD): one of many new developments in Perth, this 10,000sqm precinct on St Georges Tce is due for completion this year. Highly sought after.
• Century City, Rain Square, One40William, King St (Perth CBD): multiple, high-end redevelopments due for completion this year or next.
South Australia
• Burnside Village (east Adelaide): Major leasing campaign by Colliers about to begin for Adelaide’s number one shopping centre outside of Rundle Mall. 7500sqm expansion planned.