Owners look to unlock value in their existing assets with new, innovative retail outlets.
As the retail landscape continues to improve, property owners are looking to innovative uses of retail to grow the core value of their assets, according to the latest retail research and forecast report from Colliers International, titled “Discovering Value – unlocking hidden potential in retail.”
The report identifies the emergence of improved and increased retail offerings in airports, hotels, universities and hospitals, as owners look to extract value from their assets and provide additional services to their visitors.
“As we all become increasingly busier and time-poor in today’s fast-paced world, the rise of retail services in those places we need to spend time is inevitable,” said Colliers International’s Head of Retail, Michael Bate. “Sure, airports have had retail offerings for some time, but the new breed of airport, being led by the new International Terminal at Melbourne Airport, will see a superior retail offering, which includes both domestic and international brands to cater to our every need from fashion to food, lifestyle to leisure.
“Similarly, the retail component within hospitals is also undergoing a transformation. We’re all accustomed to a flower and gift shop alongside the pharmacy within a hospital, but in the coming years this will evolve into a full retail offering, providing a range of products, cafes, supermarkets and services that are now considered essential.”
Another emerging trend in Australian retail is the “bulge effect” in the CBD core to accommodate international retailers. According to Mr Bate, the ‘bulge effect” is taking place across Sydney, Melbourne and Brisbane; cities attracting international retailers who require larger spaces in the core retail precincts.
“We’re seeing this ‘bulge’ in areas like Pitt Street Mall in Sydney, where international retailers like HFM and Uniqlo are coming in and demanding spaces of around 3,000sqm,” said Mr Bate. “This is pushing the local brands, who typically only require 200sqm, into surrounding streets. This ‘bulge effect’ is changing the face of core retailing across the globe. You’ll notice that when you visit the core retail precincts of any city, be it London, New York, Tokyo or Paris, you’ll see the same brands along the main strip, and to find the local retailers you’ll need to step back a couple of blocks.”
This growth in demand for retail space in CBDs and commercial precincts is also driving transformation by owners. Forward-thinking owners are incorporating lobby cafes, extending their building envelopes to take advantage of location, infrastructure and laneway retail in order to extract value from their assets.
“Mixed use development is nothing new,” commented Mr Bate. “However, owners are becoming increasingly savvy and looking for every opportunity to unlock the full value of their assets. David Jones was a leader in this regard when it lodged a preliminary development submission to unlock the air space above its Market Street store in Sydney. GPT has also recently announced plans to develop the air rights above Melbourne Central. The value-add for these asset owners can be substantial. Not only are they benefiting from the sale of the residential development, the knock-on effect on their retail assets can be substantial as the residential component deliver a captive new audience.”
Food-related spending continues to drive retail spending growth, with turnover at cafes, restaurants and takeaway outlets growing at an annual rate of 11.6%.
“Australians still love to eat, and this is evident in the retail spending growth figures,” said Mr Bate. “Hence, combining residential and food retail in the one location is a winning strategy.”
According to Colliers research, the flow through from higher dwelling prices and increased residential construction continues to impact the retail sector.
“National gains in consumer spending appear to be driven by higher house prices rather than higher household incomes,” said the report’s author, Nora Farren, Director of Research at Colliers International.
The lower Australian dollar is also having a positive impact on Australian retailers, enticing buyers away from international online retail due to the negative impact of the exchange rate.
“Retail spending is forecast to maintain the momentum seen over the past year and grow at between four and five per cent during 2014/15,” said Ms Farren.