Bricks and clicks find happy medium in retail
Two recent reports from the National Australia Bank have emboldened retail landlords and owner-occupiers who were previously unsettled by online shopping’s rise.
The first was NAB’s Online Retail Sales Index which reported a 13.5% increase in online retail spending across Australia in the year to June. While ostensibly strong, the increase actually represents a slowing in growth after five consecutive years of significant uplift. The rise of e-commerce heavily influenced industrial property with online retailers taking a larger portion of the warehouse sector to store their goods, encouraging many developers to take on pre-committed and speculative warehouse projects.
The second, the bank’s Commercial Property Survey, indicated a six-year high in retail property sentiment, with respondents believing it will be the leading non-residential property sector for capital growth over the next two years. The survey found respondents believed retail vacancy rates would contract to 4.6% by Q2 2018.
So has the retail marketplace found a stable footing in the digital landscape?
“I think we’ve now found the balance now between clicks and bricks,” said Con Kavooris, Sales and Leasing Manager at LJ Hooker Commercial Adelaide.
“The advent of e-retailing spurred retailers to put everything online and wanting to rationalise their retail space. Many investors were spooked and wondering whether they should be divesting and pursuing warehouse investments. It’s taken a while, but now both ends of the market realise this isn’t the answer.”
In a sign of the importance of a property presence, major online retailers of the likes of Amazon have taken retail shopfronts to promote their goods, supplementing the online habits of consumers with a physical experience.
Mr Kavooris said while the internet had disrupted some retail experiences, many would be immune.
“The services sector – everything from barbers to physiotherapists - will always require a physical presence; they’ll be supported by online activities, but never made redundant by them.
“Investors are finding neighbourhood shopping centres, where there’ll be a butcher, medical centre and small supermarket very appealing because they’re striking the right mix of service-based tenancies, enhancing profitability for their lessees and themselves.”
Ashley Moffat, Director of Retail Leasing at LJ Hooker Commercial Gold Coast is co-ordinating the tenancies of several fringe shopping centre redevelopments in Queensland, including the $35m overhaul of the Burpengary Plaza. He echoed Mr Kavooris’ sentiment.
“In the old days, shopping centres were all about getting a major supermarket, a major discount store and surrounding them with one hundred specialty shops,” he said. “But that’s changed: it’s now about being boutique and convenient or a super-regional experience and those retail offerings in between need to be very clever nowadays to succeed.”
In line with the rise of services, Mr Moffatt said strip retail would continue to flourish in Australia due to the gentrification of inner-city suburbs.
“I think an investor with a couple of million dollars will more and more look at high-end, boutique strip retail in the inner-city fringe suburbs in line with changing consumer habits,” said Mr Moffat.
“Mums and dads nowadays have different motivations and lifestyle to perhaps the previous generations. They want to be able to get a short cab or even walk to a good restaurant and then on to a wine bar to catch-up with friends. They don’t want to line-up for a cab at night and they don’t want to be too far from the kids and babysitter.”
While online shopping had influenced the retail transaction, Mr Moffat said the internet had also influenced expectations of consumers.
“Ten years ago, if you went to a food court, about all you would find would be a kebab shop, burgers, carvery, sushi and Chinese. Fast forward to today and specialisations have really come to the fore: you can find a food court which purely specialises on different regions of Asia and that’s because the internet has made the market more curious about what’s available.”
Learn more about how to position your retail investment in the digital age by visiting ljhcommercial.com.au or contact your local LJ Hooker Commercial office.