Battle of the titans

“Australia is at the forefront of the shopping centre industry and we are known throughout the world for being innovative and flexible with our centres. We are also one of the few shopping centre industries that has supermarkets within its centres. Over the last decade our shopping centres have changed and grown dramatically, and if you are a shopping centre landlord and you are at a standstill – you are dead, as once you cease to appeal people will stop coming.”

Executive director of the Shopping Centre Council of Australia, Milton Cockburn, has a bittersweet take on the retail property market. Cockburn, who says the apparel industry is one of many sectors that has taken a big hit trade-wise, believes it is a case of  ‘survival of the fittest’ within the big shopping centres. He argues that despite many shopping centre footprints increasing, this is not only to accommodate retailers, but is predominantly to make way for more services such as gyms, restaurants and cinemas.
“With increasing online sales in the future, many stores will start to lease less space,” Cockburn explains.

“If brands are doing well online, they don’t need as many stores, so landlords will begin to look at the tenants that ‘need’ to be there, that can’t operate online – such as services.”

He said over the next 10 years the emphasis in shopping centres will be on things that can not be delivered online.

“Now we see gyms, places offering massages and a huge increase in fine dining in the shopping centres,” he added. “There will still be people that want to touch and feel things such as clothes, but we have noticed less demand for certain sectors, due to online retailing.”

Cockburn explained that with such grand shopping malls, which are often anchored by department stores like Myer and David Jones, at least one discount store such as Kmart and a supermarket, comes an increase in foot traffic, which in-turn reflects on rent prices. On average, tenants within the big regional shopping centres pay landlords about 16-17 per cent of their sales; this also includes occupancy costs.

Tenants in centres with a big discount anchor store and no department store, pay about 12 per cent of their sales, and those that are only anchored with a supermarket pay about nine to 10 per cent of their sales.

“It’s getting harder and harder for new retailers or boutiques to get into the big regional shopping centres due to the demand and the high rents and occupancy costs,” Cockburn says. “It’s usually only the big chains and big brands that can pay these prices, and if they go into a few of the shopping centres they can potentially negotiate a better deal.”

In the Australian Retailers Association’s submission to the Productivity Commission’s retail inquiry, executive director Russell Zimmereman said something needed to be done about the ‘oligopolistic nature of major shopping centre ownership’. That bias landlords were driving many retail business operators into the ground.
Cockburn strongly refutes this claim and said such a notion is ‘ridiculous’.

“There are about 85-100 major regional shopping centres in Australia which have about 15 separate owners – that is not an oligarchy,” Cockburn says. “I really get furious at comments like this, and if you look at some of Australia’s major fashion brands there is less than that. So, if anything, that is more of an oligopoly than the shopping centres.”

He says there are about 250 sub-regional shopping centres, which are owned by about 100 different people, and 800 neighbourhood centres, which have 500 or so owners. Cockburn also goes on to say that, contrary to belief, only 35 per cent of retail shops are located in shopping centres, which comprises of 40 per cent of total retail space.

Major shopping centre landlord Westfield is one of the most well-known retail juggernauts in Australia and its centres are continually expanding.

A Westfield spokesman said there are a great number of factors that influence when and where a shopping centre is built and which retailers it might have. These range from the economic environment, population and demographics, location and availability of land, planning regulations, retailer demand - including their own business objectives and a developer’s capabilities and objectives. Gary Novis, the managing director of the Retail Apparel Group, which operates men’s clothing brands Tarocash, Yd and Connor, says the company has very few stores on boutique strips and most are featured in shopping malls.

“We are always looking to secure great sites in shopping centres and are therefore always competing for prime retail space - there is strong competition for these corner sites,” Novis explains. “Having said this, we have great new shop designs for all three brands and we enjoy strong relationships with our key partners and our landlords - which does make it a little easier than retailers who don’t have a national presence.”

Department store Myer has 68 shops across Australia, with the vast majority of these based in shopping centres. A spokesman from Myer said it is important to them to feature inside large retail developments, such as Westfield, as it reflects Australian historical trends.

“We have strong relationships with our landlords in these developments and in the majority of cases Australian planning constraints limit the availability of retail space to these retail centres,” a Myer spokesman said.

Myer has signed agreements to lease 11 new stores within shopping centres across Australia and these will open up over the next few years. As well as the brand new ultra modern shopping centres popping up, many arcades and historic buildings have developed into prominent retail complexes.

The Melbourne General Post Office (MGPO) shopping centre, which was built in 1859, is located in the heart of the city and has more than 50 stores across three levels. Marketing manager Melissa Chisnall, said despite the long and involved planning, zoning and leasing process that comes with a heritage listed asset, developers recognised the location as a prime retail opportunity.

“Despite the doom that is often reported on in association with the growth of online spending, it’s actually an incredibly exciting time for the shopping centre retail landscape and bricks and mortar stores in general,” Chisnall says. “Intensified competition is good for consumers and as the world changes, so do shopping trends and retailers have the opportunity to adapt, progress their creativity and look at new ways to engage with their customer.”

Brands wishing to take out a lease within MGPO do need to meet certain requirements and Chisnall says it is imperative that the brand and retailer fit within the overall positioning of the centre to ensure it and the shopping centre succeeds. She said the centre differs from others as it has a mix of national and international brands, such as Willow, Alpha60, Acne and LifewithBird, many of which are not located in other traditional shopping centres. As it is a stand-alone shopping centre it is less restricted by some standard model shopping centre requirements.

“Each retailer at MGPO has been selected because of its unique offering and point of difference, she added.

“So this means they complement each other to the benefit of the shopper and they work with each other rather than against - what someone will find in Mimco, they won’t find in Acne, and vice versa,” Chisnall says. When retail trade is down Chisnall said there is no ‘silver bullet solution’ to assist in generating increased sales in a competitive environment.

She believes strategies need to be employed by landlords and retailers alike to improve the overall shopping experience to encourage visitation and  spend.

“It’s important that retailers acknowledge that the rules of selling have changed. At MGPO we are focused on improving the overall experience provided to shoppers and visitors alike, with intimate events and experiences, artistic and creative visual merchandising displays and improving the quality of dialogue we have with our target audience,” Chisnall says.

Despite being based in a shopping centre format himself, Milliner Robert J Carroll, who runs the Strand Hatters store in Sydney’s bustling Strand Arcade, says he cannot stand the huge retail complexes. He believes boutique strip shopping is a dying trend due to the presence of bigger shopping centres and that arcades offer a happy medium between the two retail models. He says he feels lucky with his store’s location, as although it is a shopping centre, some people do own their own shops and the arcade offers customers a more personal experience in comparison.

“I don’t like big shopping centres and don’t go into them as they are generic, impersonal and responsible for individual retailers going under,” he says. “It’s the same thing over and over again - I would much prefer to support an individual shop and get a more personal service and not such common fashion.”