Ellis Davies, MacroPlan's Manager - Retail, reviews the September 2013 MacroPlan Shopping Centre Benchmarks and considers the outlook for shopping centres. Over recent years it is clear that trading conditions for shopping centres have been challenging. While Australia’s economy has remained relatively strong since the GFC, consumers have been overly cautious and have been saving more and spending less. Consumers are also directing more of their disposable income to services and leisure activities, impacting on the growth of retail sales. As a result, retail sales increased by an average of only 3.3% per annum over the last 5 years, compared with 6% for the previous 5 year period (2003 to 2008), according to the ABS Retail Trade series.
While overall growth in retail sales remained relatively subdued across the board, supermarket based centres continued to grow strongly.
This challenging retail environment has most notably impacted discretionary expenditure, particularly spending on apparel. Department stores continue to struggle to achieve sales growth, while fashion specialty stores have also been impacted, resulting in a number of prominent retailers recently going into administration.
A further factor is the continued strong growth in internet retailing, with Australians now spending an estimated $14 billion on retail online. While the high Australian dollar has made overseas retail sites more affordable, the majority of online retail sales are still generated by domestic retailers.
Against this backdrop, new supermarket centres continue to open, particularly in the eastern states. Further, the arrival of a number of leading international retailers is providing the catalyst for top regional centres to undergo/plan major redevelopments and expansions.
The latest Shopping Centre Benchmarks produced by MacroPlan show that shopping centres outperformed the total retail market for the year ended September 2013. While overall growth in retail sales remained relatively subdued across the board, supermarket based centres continued to grow strongly despite ongoing price deflation in most food and grocery categories.
Supermarkets achieved the strongest growth of all the categories, while department stores and discount department stores achieved little growth in the year to September 2013. Mini-majors and specialties recorded reasonable growth, though at a reduced rate compared with the previous two quarters. Overall, year on year sales growth for all shopping centres was 2.5%, compared with 2.3% for the ABS Retail Trade series.
Examining the results by centre type, it is clear that supermarket based centres achieved the strongest growth of all centre types, with the strong growth reflecting the performance of the supermarket anchor. Regional centres and discount department store (dds) based centres achieved solid growth in the year to September 2013. In contrast, sales productivity for CBD centres has remained flat since December 2012.
Looking ahead, interest rates are now at record lows and households are continuing to pay down debt, with the household savings ratio stabilising at a 20 year high. With consumer confidence on the rise following the federal election, general economic conditions suggest good potential for improved growth for shopping centres in the near future. However, growth is expected to vary more across different shopping centre types than in the past.
Shopping centres which can capitalise on the increased consumer confidence ....have very good reason to be confident for improved growth.
Supermarket based centres and the most convenient sub-regional centres, which can cater for the increasingly time-poor shopper, are well placed to perform well, particularly those with a strong supermarket anchor.
Larger shopping centres with major non-food anchors, which compete more for discretionary spending, will need to do more to entice shoppers. The top regional centres which can attract a number of well known international retailers and create the most desirable destinations for shopping and leisure activities are expected to achieve improved sales growth, while other shopping centres that offer a unique shopping experience are also likely to continue to perform well.
While online spending is expected to continue to grow, the falling Australian dollar (and a possible charging of the GST on goods of less than $1,000 purchased online from overseas retailers) will dampen this growth to some degree.
Therefore, while conditions for shopping centres are improving they will continue to be somewhat challenging. Shopping centres which can capitalise on the increased consumer confidence and can meet/exceed consumers’ expectations have very good reason to be confident for improved growth in the future.
MacroPlan produces the Shopping Centre Benchmarks every month, which comprise over 300 shopping centres with annual turnover totalling around $40 billion. As the only monthly benchmarks in the industry, they provide the most up-to-date benchmark data across a range of centre types and retail categories. For further details please contact Ellis Davies at email@example.com.