GAP and Zara aren't just mixing up Australia's apparel offering: they're also set to shake up the availability, affordability and appearance of local retail space. Erin O'Loughlin chats to property firms Savills and Colliers to find out the specifics.
The sprouting of Zara and GAP on local soil may have some Australian fashion retailers shaking in their on-trend boots, but commercial property managers are downright excited.
Game changing! Big name drawcards! A fresh look for retailing! They're all sentiments that flow from the mouths of some of Australia's prominent retail property managers when talking on the subject. While the international brand influx is undoubtedly good news for such professionals – growing, as it does, their potential client base – they're also keen to assert the positive flow-on effects for local fashion retailers.
National director of retail for international property firm Colliers, Nathan Clark, is managing Zara's local real estate investments. In addition to describing the brand's migration as likely to unleash a “fresh look” on local shopping centres and strips, Clark says many local retailers will benefit from Zara's presence within their shopping environ.
“It may not be a competitive environment for some,” Clark says. “They would see it as actually a great [customer] drawcard.”
Having worked in China for the likes of Zara, H&M and Adidas until 2008, Clark also believes Zara's movement to Australia is unlikely to steal retail space or sales from local fashion operators, or even drive up leasing rates.
“I haven't confirmed it with them but I understand [Zara's] strategy will probably be in the order of 20 to 30 shops in Australia... It's not as though they're a Cotton On for instance, with over 250 stores across the country. They will go in select locations only.”
While Clark does not consider Zara's leasing of 1200 to 1700 sqm stores will have a major impact on the retail leasing market, director of retail services at Savills, Leighton Hunziker, takes a different view.
“These large international brands I think will be game changers; game changes for landlords and also game changers for the existing fashion industry as we know it now,” Hunziker says.
“When I say that, I think forewarned is forearmed. These guys will operate in spaces anywhere from 1000 sqm to 4000 sqm and so that becomes in a sense a mini major. I've witnessed stores of 3000 sqm that will do a turnover of a department store.”
While Hunziker concedes the initial appearance of Zara and GAP in the Australian market is going to be in prime retail developments such as the new Westfield Sydney, he says there will be a flow-on effect on other shopping centres as the brands roll out additional sites.
“Quite frankly, there aren't really huge lots of space around in shopping centres,” he says. “Someone's got to be displaced, or someone's got to go broke, or you've got to amalgamate sites. Anywhere where you're going to amalgamate sites, you're going to get rental adjustments.
“These [international brands] know exactly what they can pay in rent. They are a high volume, lower margin operation and so they're not going to be able to pay the rent the local smaller mum-and-pops or local chain retailers are going to pay. That means landlords can do two things. They can decide to freeze them out, and hold out forever which means they won't get a deal. Or they can make a deal and cop a bit of a rental hit... That may reflect in higher specialty costs as they try and pass the shortfall around.”
Despite being aware of this burden on landlords and other retailers, Hunziker believes the international brand migration is still a positive for Australia's retail development sector.
“I think it's healthy for any industry to have some attrition. It's survival of the fittest and fashion is certainly no exception... There will be a shake-up, which isn't a bad thing because our shopping centres, by and large, are very dull, boring and bland. They're all the bloody same. They're horrible.”
Both Clark and Hunziker agree Australia's retail developers need to channel something special, either to lure the internationals as tenants, to draw customers away from other centres the internationals establish themselves within, or to combat the sleeping giant that is online retail.
“I think shopping mall developers need to wake up to themselves and provide environments that are more life-friendly and more immersive in terms of life experiences than just homogeneous malls flogging t-shirts and jeans,” Hunziker says.