Strong population growth driving Australian Retail

Confidence is high in Australia’s retail spending and investment sectors.

Confidence remains high in Australia’s retail sector, with both investment and spending remaining robust, supported by high population growth, new technology and the rise of online retail sector. The Colliers International H1 2018 Retail Research and Forecast Report, highlights that the retail property sector in Australia continues to perform well, evidenced in the strong investment volumes and development pipeline. Retail investment is being underpinned by above average population growth (1.6% per annum), particularly in Sydney and Melbourne where growth is strongest. 

 “The increase in density in cities like Sydney and Melbourne has resulted in some developers focusing on developments with a combination of residential, retail and office which increase amenity, walkability and liveability,” said Kate Gray, Director, Research at Colliers International. “This has resulted in a stronger development pipeline over the next two years, with many developers focusing on growth states of Victoria and New South Wales.”
Retail spending has continued to grow across the country, with March 2018 retail sales results showing a national year on year growth of just over 3 per cent. ASIC data has also recorded a fall in the total number of insolvencies in the last half of 2017, with the retail sector seeing one of the largest falls. 

“Australia has always been a unique market in that online retail has never had the same penetration as seen in the US and UK,” said Michael Bate, National Director, Retail at Colliers International. “As Amazon’s launch has proved thus far to be a blip on the retail radar, it has driven confidence in our market as to the continued relevance of bricks and mortar in retail strategy.  Retailers still cannot afford to be complacent, and must prioritise in-store experience and technological advancement in their strategy to remain a strong performer in this market.”

According to the Colliers report, technology is likely to be a key driver to improve productivity, with many retailers looking to use their store network to grow online business through either click and collect options or faster delivery for online sales.This is a particular focus for the major grocery retailers with click and collect options reporting growth three times faster than delivery sales.  There has also been the rise in café and restaurant spending which has experienced the largest increase in demand.  “This could partly be due to the ‘uber effect’ where restaurants are using the Uber platform to increase sales. We are increasingly seeing consumers wanting to have a seamless integration with digital and in store experience; they complement each other,” Kate Gray said.

George Wragge, Director, Retail Leasing at Colliers International said, “Whilst online sales are generally increasing in the fresh food market, the biggest barrier to a significant adoption of this medium by the customer is tangible preference of personally selecting the fresh food item.”
“Landlords need to be increasingly considerate of the grab and go options with delivery mediums so that delivery riders and pick up points are not affecting the dining experience and bottle necking aspects retail centres.”
This trend has resulted in a shift away from discretionary sectors such as department stores, apparel and household goods, towards food categories. 

“Online retail has continued to grow in importance in the Australian market, however we have not reached the same level of penetration that is being felt in some other markets, including the US and UK. In the UK, around 18 per cent of total retail sales are online with an astonishing 25 per cent of fashion sales being from online sources,” Kate Gray said.
“The data suggests that the online sector is being driven by multi-channel retailers which integrate their online and in-store experience. This is where there is continued growth, with retailers integrating their store network and their online businesses so customers can interact across both channels.”

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