Retail General Manager's observations from recent trip to Perth

I recently visited Perth to meet clients, prospective clients, agents and to see some centre openings and extensions. There are plenty!

There is no doubt that Perth is showing signs of retail spend improvement after a very challenging period of flat or negative growth. This was the message from all of the many people with whom we discussed the market. Consumer confidence hit a 5 year high in the September quarter.

In fact, Deloitte Access Economics predicts WA will have the strongest retail sector of any State over the next five years.

Some of the key ‘take-outs’ from my visit include;

1. Reflecting the east coast, there seems to be higher investor demand for all asset classes other than sub-regionals

2. Consumer spending and confidence is still poor, but showing signs of improvement

3. The bottom end of the retail leasing market is firmer than the middle to upper – retailers are looking for deals and very cautious about big rents

4. Tightening lending policies have softened leasing demand

5. Project leasing is being driven hard by capital leasing incentives

6. Most major shopping centres are looking to food and beverage precincts to underpin expansion plans (same across the country).

7. Aldi are expanding in WA and are being courted by centre owners looking to repurpose space that may become vacant (i.e part sub-regional space). Or add to the centre’s overall appeal, visitation, spend.

8. Owners are looking at other ‘non-retail’ usages to either repurpose poorly performing space or ‘bolt on’ to centres if land is available. Gyms, fitness, medical, childcare – as examples.

Vacancy remains an issue in the suburbs across all asset types. In an increasingly competitive market, centres which have not adapted to compete are showing signs of distress and many will need investment and smart leasing strategies to survive in to the future.

I visited Westfield Carousel on the redevelopment opening day and I must say…wow! The outdoor casual dining opposite the new Hoyts foyer is seriously impressive. Of course it was super busy on opening day but the design, location, ambience and quality of operators should ensure it’s a roaring success. There was plenty of hoarding downstairs in the new fashion wing outside David Jones – many with ‘Coming Soon’, including WA’s first Sephora store. The extend of the fashion precincts is a certainly a sign of the times…we understand even this powerhouse has struggled to secure fashion, with plenty more deals to do. I also visited the impressive Belmont Forum, a Perron asset, which has recently undergone a revamp with a new fresh food offer outside a bigger, new Coles.

Vacancy is still significant in the CBD. I noticed particularly high vacancy in the many arcades and thoroughfares, particularly the smaller shops. though Uniqlo’s recent opening was heralded as a big success and by all accounts they have started well. Hopefully this will be a ‘shot in the arm’ for the CBD, which has seen the first stage of Charter Hall’s Raine Square open, eventually offering 18,000 sqm of retail space including initially Palace Cinemas, Coles Central and Tim Ho Wan. There is a very big emphasis of casual dining in the mix with a number of new entrants to the WA retail market.

Located next to the airport, DFO Perth opened recently with well over 100 retailers, mainly fashion, lifestyle and accessories. We understand that it is trading well so far. The big question is, what will be the impact on other centres, particularly the centres still relying heavily on fashion spend? Time will tell. Reflecting the changing nature of factory outlet assets, DFO will also offer a significant food offer including QSR, cafes and even a Lindt Outlet store.

Author:
Warwick Turpin
General Manager - Retail
02 9221 5211

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Queensland Container Refund Scheme goes live

As of 1 November, the Container Refund Scheme (CRS) commenced in Queensland. Similar to its southern counterparts, the scheme offers a refund of 10 cents for the return of selected glass, plastic and aluminium drink containers. Across Queensland, more than 230 sites will commence operation in November 2018, increasing to over 300 sites by November 2019. The scheme conception began with the passing of the Waste Reduction and Recycling Amendment Bill in September 2017, which resulted in Container Exchange being appointed the Product Responsibility Organisation (PRO), tasked with realising and implementing the scheme. The scheme “reflects not only the 10-cents that people will receive when they return an eligible container, but also the benefits that the scheme will deliver for Queensland’s environment, communities and charities”, Minister for Environment, Leeanne Enoch noted in the bill commencement hearing.

The scheme itself, particularly the nature of the collection, storing and transferring of containers, presents a complex planning issue, particularly within the Queensland context. Planning across the state is regulated by Local and State Governments through the direction of overarching legislation and policies, differing between each of the 77 local government areas in Queensland. In this, each specific site across the state was subject to review by up to 5 different government departments. Given the minor nature of the proposed activities to occur on the sites, a solution to the problem was to amended the overarching Planning legislation to permit exemptions to certain, low risk sites.

Engaged to provide planning advice for the establishment of the scheme, MacroPlan was tasked with undertaking an assessment over 600 proposed Container Refund Point (CRP) sites against the relevant policies, highlighting risk levels associated with each site. Through this process, the low risk sites were recommended to be made exempt of regulatory assessment to further the intent of the scheme. Determining the look and feel of the exemption required a multi-departmental involvement from the State Government, reviewing and including criteria to satisfy all involved parties. MacroPlan played a vital role in providing planning advice regarding the proposed exemption, reviewing each iteration of the proposed exemption, assessing and reporting the effects of the exemption on the proposed CRP sites. The last iteration of the amendments to the Planning Regulation came into effect on 19 October 2018, facilitating exemptions to approximately 65% of the total scheme sites.

Having the intricate knowledge of the exemptions, the MacroPlan team prepared a suite of the supporting material to be provided to the CRP operators and owners, detailing their planning and regulatory obligations, as well as, methods to navigate the exemptions outlined in the Planning Regulation. These documents have now over the last couple of weeks assisted the successful implementation of the CRS on 1 November.

If you are interested in further information regarding the CRS, or require assistance in facilitating a CRS, feel free to contact Damian Delmanowicz or Thomas Auckland on 07 3221 8166.

 
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Dandenong… the next Parramatta?

Earlier this month, Development Victoria invited MacroPlan’s Executive Chairman, Brian Haratsis to speak at “Dandenong Reimagined”. The event was aimed to gather key stakeholders from the property sector who sharepassion for Dandenong. 

Without a doubt, Dandenong is already attracting a high level of interest and large-scale development projects, such as the Australian Tax Office building and the Dandenong Government Services Building, which has been delivered with the support from the government.  Since the inception of the RCD Initiative, more than 1,800 jobs have been created and some 40 percent of land has been and will be developed.

During Brian’s presentation, henoted that Dandenong had all the fundamentals to qualify itself as a “CBD”. The precinct benefits from a high level of public transport and road network connectivity, which make it ideal as a hub for investment, employment, high amenity and future population growth. Not forgetting that it produces nearly half of Victoria’s manufacturing output, is home to more than one million people and accommodates one in every three jobs in Melbourne.

What used to be a place of neglect, now sees itself regainas the social and economic centre of Melbourne’s south east.

So, could Dandenong be the next Parramatta? Definitely, yes.

For further details of Brian’s presentation, please visit http://www.development.vic.gov.au/projects/revitalising-central-dandenong/future-development

For more information about the opportunities at Dandenong, please email Joel Taylor or call 03 9600 0500.

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‘Fast 5’ with Yvette Burton – Senior Consultant

Yvette joined MacroPlan in September 2018 as a Senior Consultant. Prior to this, she was working as a Senior Research Analyst at CBRE. She is a self-driven and motivated research professional with over 12 years experience in economic and property market research. Yvette possesses a passion for understanding the “bigger picture”and uncovering meaningful insights that leads to well-informed client service delivery. Yvette is adept at mixed methods of research along side exceptional analytical, verbal and written skills, communicating with insight and impact. Driven to produce credible and evidence-based research through analysis of large datasets, identifying trends and relationships with other key market indicators and further qualitative and anecdotal evidence.

 

What has been your career highlight to date?

Whilst at the REIQ I was given the opportunity to create a new research publication from scratch – following the decision to cease publication of The REIQ’s hard copy property & lifestyle magazine. I was solely responsible for creating an informative and highly detailed residential property research publication that would be distributed electronically. Published on a quarterly basis, the REIQ Queensland Market Monitor is still published to this day and is up to its 39th edition. I feel quite proud to have created a publication that is highly regarded in the industry.

 

Why Did You Choose Your Profession?

Growing up I had always wanted to be an architect but two years into uni it didn’t quite fit and I transferred to the Property Economics degree. With a more math/analytical mind I knew I’d found my career. On graduation the plan was to move into property valuation, however when the opportunity came up to work in Property Research at the REIQ I thought why not? I have since not looked back and have enjoyed being in the property and economic research sector ever since.

 

What upcoming approved project/development can you see having the biggest impact on the Brisbane or SEQ?

Hands down would have to be the Queens Wharf precinct. On completion, the Brisbane city skyline will be changed forever and along with many other major projects in the region, it will finally put Brisbane on the global stage, no longer the “country cousin” to Sydney and Melbourne. The Howard Smith Wharf and proposed Eagle Street Pier developments will also enhance Brisbane as a river city, so these two projects will also be significant in shaping the future of the Brisbane CBD and fringe.

 

In your view, what will Australian cities look like in 50 years?

Wow if only we all knew the answer to that question! Well for a start we know that land is a limited resource and with a growing population, the only way will be up. We will also have more satellite cities connected by highly efficient infrastructure networks. Driverless cars, buses and trains will be the norm – and perhaps even cars that fly! Getting around will become much more organic and the built environment will be more responsive/integrated with the environment.


Why do you feel like Brisbane is an appealing destination for investment?

Brisbane is on the cusp of finally “growing up”. The level of public and private investment already underway is evidence that the city of Brisbane has an offering unlike other Australian capital cities. Major projects like the Brisbane Airport expansion, Queens Wharf, Howard Smith Wharf and the Mega Cruise Ship Terminal is going to further strengthen Brisbane as a destination of choice. History also tells us that the Brisbane residential property market tends to lag Sydney & Melbourne’s property cycles by 2-3 years. Now that they have reached their peak, and as interstate migration to Queensland continues to improve, Brisbane’s property market is due for its turn in the spotlight.

Yvette Burton

MACROPLAN MINISERIES: RETAIL FLOORSPACE: IMPACTS OF ONLINE SALES

MacroPlan, E-News miniseries 1/4

Unpacking the impacts of online technology at a macro level, Australia is trailing the US and UK by around 3 years i.e. the US had 12% of sales online (8% in 2015) and Australia currently has 8%. Historically (1992 – 2018) retail sales growth in the US has averaged 0.36% MoM compared with Australia historically at 0.48% MoM. This historic growth rate is not likely to be achieved until retail price deflation bottoms out and wage prices increase. Based on history (Graph 1) sustained annual retail trade growth is likely to be in the range of 2.5% to 3.5% driven by population growth (1.6%), employment growth (2.1%) and inflation (2-2.5%). I’m predicting stable growth in Australia because much compositional and structural change in the sector is underway and Australia’s corporate retailers are adopting world’s best practice for e.g. Woolworths new distribution centres at Dandenong and Tarneit. Online retail impacts on bricks and mortar will occur, but as history and innovation practices in retailing suggest, these impacts will be largely absorbed and well located and established main streets and malls will survive.

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Currently 40% of retail sales growth is directed to online sales in the both US and Australia. Assuming that 50% of all future growth in retail sales is directed online then retail sales from bricks and mortar should grow at around 2% per annum (excluding redundant floorspace), in the medium to long term but the geographic distribution of growth in floorspace, and retail rental impacts will be uneven. For example, product types such as audio/visual with strong online presence can utilise less shopfront or in-store floor space and therefore secure premium shop front with concessions using in-store locations. Rental profiles for shopping centres could therefore increasingly reflect the online sales potential of tenants, not just the sales potential of trade catchments. New analytics developed at Macroplan reflect the compositional impacts of online retail both positive and negative. Negative impacts of in-store trade caused by retail price deflation and can be counterbalanced by increasing sales volumes for many products or purchase of supplementary products. Global retail sales potential will considerably outweigh product price deflation and creates a real opportunity for retailers. The real impacts of online retailing on bricks and mortar need to take into account evolving retailer business models. These models will be further explored in following Macroplan e-news. Irrespective retailers who embrace the technology/online world will have a far greater chance of thriving in the future.

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BRIAN HARATSIS

MACROPLAN – CHAIRMAN

E – haratsis@macroplan.com.au