Australia’s Big Guns: diversity and adaptability

Shopping Centre News
Tony Dimasi, Managing Director- Retail
Vol 33, Number 1 - March, 2015 In this article, Tony Dimasi charts the course of the Big Guns from their early days to the present time.  He contrasts them with their American counterpart and draws some conclusions.

Australia’s biggest and best regional centres continue to grow strongly, despite whatever headwinds have been faced by the retail sector more broadly, particularly in the post-GFC period. These iconic retail assets provide an offer which, in terms of its diversity, is unique by world standards – that in essence is their key strength, while their adaptability is another.

The current development trends evident at many of the Big Guns are once again testament to these two virtues, a feature which has underpinned the success and resilience of these centres for the past 30 years. A large number of them have recently undergone or are currently undergoing major expansions and redevelopments, which are adding the next layer in what is already a multi-layered and multi-faceted shopping and entertainment package.

Many of these centres started life with the primary objective of providing accommodation for suburban department stores during the 1960s and 1970s. Indeed, a large number of them were originally developed by the department store operators, Myer and Grace Bros, and apart from very large department stores had little else of consequence in their first incarnations.

Over the past three decades, we have witnessed their adaptability through the successive additions of new layers of customer attraction – the mass merchandise discount department stores and supermarkets which were so popular during the 1980s; the foodcourts, cinema multiplexes and then fashion specialties during the 1990s; the mini-majors and homewares stores during the early 2000s; and currently the new fast fashion global retailers, together with extensive food & beverage offers, even more specialty fashion and revamped fresh food shopping.

Facilitating this ever more diverse offer has been the continual growth in size of these assets. Over the past 20 years, the typical regional centre in Australia has increased in size by about three-quarters – from around 48,000 sq.m to 84,000 sq.m. The largest, and generally also best performed, have increased further. The average size of the Top 10 regional centres in the country has doubled in size, from around 67,000 sq.m to 134,000 sq.m (see Chart 1 below).

Australia's leading regionals

The importance of the department store was still quite evident 20 years ago, when close to 40% of floorspace in these centres was devoted to department stores. The steady fall in the department store’s fortunes is apparent in the changing composition over the past 20 years, as is the increasing diversity through the continual additions of more mini-majors and specialty stores.

It is remarkable how, over a long term period, the growth in scale of these centres in Australia has been both steady and even. Typically they are increasing in size by 30,000 – 35,000 sq.m each every decade.

Diversity of offer has therefore come in part from continual increases in size, but that diversity has also been manifest in a number of other ways.

First, there is diversity across both retail categories and market segments – even in food and groceries, for example, they have it all covered, from discount supermarkets (Aldi is represented in a number of them, something which is unheard of in comparable international assets) to artisanal fresh food specialists.

The availability of supermarkets, both large footprint, full-range supermarkets and the much smaller discount formats, plus extensive specialty fresh food offers, means that Australian consumers do not blink at the thought of doing their food & grocery shopping at a large regional centre. In fact, many of these centres achieve food turnover in the hundreds of millions.

Interestingly, revamped and extended fresh food shopping is one of the key features of the latest round of redevelopments at the various top regional centres currently underway, despite the apparent incongruity of visiting a 100,000+ sq.m regional centre for ‘convenience’ shopping.

The inclusion of supermarkets in these centres, and the willingness of Australian consumers to embrace the supermarket as an integral part of the centre, has helped to create a baseline trading strength, and to generate enormous volumes of dependable, regular footfall traffic.

In fashion shopping, diversity of offer comes in the coverage from lower end mass merchandise (discount department stores, lower end specialty apparel stores, mini-majors) through to premium specialty fashion labels, which are extensively represented in almost all major regional centres. Luxury designers, such as Prada, Louis Vuitton, Gucci, Chanel, Tiffany & Co and others also get a look in at the right locations. Not too many centres contain luxury brands of this calibre, of course, but a number certainly do, and more will do so in the near future.

Again, in typical super-regionals elsewhere, particularly in the United States, the discounters are generally not represented, as centres of this nature are deemed to be the provenance of department stores and generally higher end apparel and homewares shopping.

Between food and fashion they cover everything else – homewares, household goods, retail services, and of course entertainment. The cinema multiplex has been the mainstay of the entertainment offer, but has been increasingly supplemented with ever improving food & beverage, a trend which is set to explode in coming years.

Diversity of offer also comes by way of the sheer number of retailers provided. It is quite typical for an Australian super-regional centre to contain 100 – 150 more shops than its counterpart in the US, even though the US centre might have substantially greater floorspace. The differences lie, first, in the propensity of major US regional centres to be much more department store dependent (many containing 3, 4 or even 5 such stores) as well as the much smaller average specialty store size for Australian centres as compared with the US centres.

Thus, a centre such as Chadstone in Australia contains about 150,000 sq.m and accommodates close to 500 retail shops, whereas South Coast Plaza in Costa Mesa in the US, one of the very best super-regionals in that country, contains about 250,000 sq.m but only around 300 individual shops.

Their adaptability has been readily evident both in terms of what they provide and what they look like i.e. the environment that they offer. First and foremost their focus has been on retail mix, and ensuring that whatever is new and hot in retailing is included in their list of attractions. In that way, they have become the natural home for pretty much every significant retail innovation as it has arrived in Australia, the most recent being the new fast fashion global brands.

Increasingly, they are also adapting physically, from an environment which originally was an enclosed box with its back to the rest of the world, to one which is becoming a much more welcoming neighbour to the surrounding world, with town squares/piazzas, street facing restaurants, and more mixed-use development.

With the benefit of hindsight, all of this might appear obvious, perhaps even straightforward. However, the planning and execution of strategies to maintain these assets at the pinnacle of the retail hierarchy have been painstaking, and the need for continual renovation and revitalisation has been paramount. The efforts that have been devoted to achieve these objectives cannot be understated.

The rewards have, in the great majority of cases, reflected those efforts. It is well known that, on a productivity basis (i.e. dollars per sq.m of floorspace) Australian regional centres exceed the trading levels of their international peers, and by a fair margin.

Not in every case of course – there are many examples globally of highly successful centres, which trade at levels similar to or higher than those recorded by Australia’s best. But as an asset class, Australia’s Big Guns stand apart, even on a global basis.


About the author:

Tony Dimasi Managing Director – Retail E: Dimasi is MacroPlan's Managing Director – Retail.  Since 1982 Tony has undertaken independent research on behalf of retailers, shopping centre owners and managers, property developers, government and statutory authorities, as well as a wide range of other clients. The research includes both supply and demand analysis, as well as extensive customer research, investigating customer behaviour, motivations and preferences with regard to shopping and activity centre uses. Tony has worked across all parts of Australia and New Zealand, and has provided advice in relation to virtually every significant activity centre location in both countries. The range of projects has included BD properties, super regional centres, regional and sub-regional centres, district and neighbourhood centres, homemaker retail facilities, freestanding stores, and all other retail formats, as well as commercial and industrial precincts.
About MacroPlan: MacroPlan’s experienced and qualified economists align their understanding of macro-economic forces with micro-economic variables such as geographic and industrial characteristics, demographics, labour market shifts, resource demand and commercial realities.  Contact Tony Dimasi, Managing Director – Retail today to discuss your property research requirements.