Rental squeeze: retail revolt
NATIONAL: Emerging retailers are being forced to think outside the square in the wake of an increasingly volatile property market.
Collaborative retail spaces, "store-in-a-box" concepts and free rental agreements are among the measures being embraced by entrepreneurs as vacancy rates continue to plummet and occupancy outlays soar.
Key data released by retail leasing specialists leaseinfo.com.au suggest while the completion of new retail developments will restablise vacancy rates over the next three years, retailers are balking at the prospect of entering a generally unstable leasing environment.
Director Simon Fonteyn said Sydney had not achieved the same levels of growth as Queensland and Western Australia in the past five years and had no resources boom to drive demand.
"Many retailers are choosing to open stores in Queensland and Western Australia rather than Sydney because leasing conditions in Sydney continue to deteriorate rather than improve as occupancy costs are driven higher and consumer spending is squeezed by rising interest rates, petrol prices and energy costs."
Fonteyn analysed more than 20,000 leases in the major Sydney CBD shopping centres - including Queen Victoria Building, Sydney Central Plaza, Mid City Centre, MLC centre, Imperial Arcade and Centrepoint Shopping Centre - and found the average rent per annum paid by fashion retailers was $301,613.
He said retailers were becoming much more strategic in deciding where they located their businesses and the costings involved.
"It is important to note that vacancy rates are starting to creep up in regional shopping centres in NSW as poor sales performance and higher rental increases are failing to attract retailers," he said.
Sydney-based fashion entrepreneur Omar Varts said these "overwhelming" conditions were forcing emerging designers to change their approach to retailing and commerce. Working in collaboration with two strategic IT and marketing partners, Varts is set to launch an innovative "store-in-a-box" space in Oxford Street later this year. The store will offer designers a retail space or "box" to display their collections in for a $190 - $540 monthly fee and a 10 per cent charge on each item sold.
"Designers receive 90 per cent of the funds from each sale while getting extensive exposure in a progressive store in a primary Sydney location. In Sydney, the costs and risks involved with setting up on Oxford Street can be overwhelming for individual designers or small labels."
Varts said minimal occupancy fees would also allow designers to showcase creations free from commercial restraints.
"In traditional retailing, it is always an inherent risk for the storeowner to stock something that may not be commercially viable. Essentially, we want to see more individuality and creativeness."
The retail concept, called Roof On Fire, will launch this September and follows similar schemes developed by independent designers combating leasing woes.
Earlier this year, six graduates from the TAFE NSW Fashion Design Studio secured a sponsorship deal to launch their own collaborative boutique in Sydney CBD shopping destination, The Strand. Dubbed The Graduate, the boutique enables all six designers to tap into foot traffic from surrounding stores which include Alex Perry, Lisa Ho, Bettina Liano and Zimmerman.
This preceded a recent initiative developed by retail development group TCB and seven Queensland designers - including Gail Reid (of label Gail Sorronda) - who were each granted a fully-fitted retail space, rent free for 12 months.
Varts said independent designers would continue to pursue schemes such as these if retail leasing conditions did not improve.
"We're giving [designers] affordable retail space at low cost and low risk. The designer chooses what they want to stock, they are not dictated by what a traditional storeowner wants to buy and the designer receives 90 per cent of the funds directly from the retail sale."
By Assia Benmedjdoub