In spite of the prominence of marquee international brands and national chains, over one third of retailers in Australia’s largest 31 shopping centres are small independents, according to a new study by the PAR Group.
The PAR Group is an independent property research collective, consisting of Damian Stone of Y Research, Rob Ellis of The Data App and Anthony De Francesco of Real Investment Analytics.
This PAR Group study, a continuation of previous work in this area http://par.group/add-to-cart/, reviewed the occupancy of the 31 largest shopping centres in Australia, analysing just under 10,000 retail tenancies, to determine centres exposure to various retail tenancies across different industry sectors.
The study found that 37% of retailers are smaller business, operating between 1 and 3 stores across the 31 centres. These independent retailers are primarily engaged in food and beverage (cafes, takeaway food outlets and other food retailing, such as butchers) and health and beauty (hairdressers, barbers and nail salons). Their exposure to fashion is minimal.
Retailers occupying between 4 to 10 stores are dominated by smaller fashion chains, such as Autograph, Alice McCall and Zimmermann. This group of outlets occupy 18% of stores.
Conversely, at the other end of the spectrum, large retail chains, which are operating from at least 80% of shopping centres account for just 17% of retailers. Examples include mobile phone retailer, Vodafone and Travel Agent, Flight Centre, which operate 50 stores across the 31 centres.
23 retailers operate from more than 95% of centres, including supermarkets Coles and Woolworths, discount department store Target, communication retailers Optus and Telstra, food and beverage operators KFC and Subway. The list also includes, Premier Investment retailers – Smiggle and Peter Alexander, sports store Rebel and major fashion retailer Cotton On.
Implications
While there are several major retailers common to most of Australia’s 31 largest shopping centres, the predominant type of retailer are small independents, running a local take away or hairdresser. This reliance on small businesses highlights some of the potential issues with the tenancy mix of shopping centres post April 2021, with the proposed ending of the Government’s pandemic assistance programs, Jobkeeper and Jobseeker.
Whilst these Government programs have assisted small retailers to continue trading throughout the pandemic, any significant changes to consumer spending, in particular discretionary spending, could potentially leave these retailers vulnerable.
This has ramifications for shopping centres owners, as they face the risk of store closures of small businesses which have insufficient financial reserves to trade profitably in a post-COVID19 retail environment.
In addition, there is the potential for network consolidation of major retail chains, such as Premier Investments and Mosiac Brands. The legacy of COVID19, in terms of long-term changes to international travel, could lead to further store closures from major retailers, such as Flight Centre and luggage retailer Strandbags who occupy space in over 80% of centres.
Any consolidation from major retailers, either by reducing their store networks or via restructuring and/or due to going into administration, raises re-leasing challenges for centre owners. In all likelihood, independent operators will backfill vacant space, but whether historical rental levels are paid is clearly questionable.
With shoppers increasingly purchasing goods on line, central to the next decade of retail is getting consumers to the door of the shopping centre. The choice each centre offers consumers, based on their tenant mix, plays a key part in attracting customers from beyond their primary catchment area. Super and Major Regional centres, by definition, exist to serve large catchment areas in competition with more convenient local neighbourhood options.
The pandemic induced increase in the demand for click and collect services has impacted on shopping centre footfall, as well as store rent. Consequently, servicing the click and collect market will be key, as owners and retailers will need to foster additional retail spending, maybe via old-school window-shopping store presentation, exclusive in-store promotions or secure collection spots within the interior of the centre.
In a world of choice, improving tenant diversity, focusing on attracting people to a shopping centre more frequently, and offering services and experiences that cannot be found online, or at competing centres, will create a centre of “choice”.
For further information, please contact:
Damian Stone, Principal and Chief Problem Solver of Y Research. M: 0433 525 414 or email: damian.stone@yresearch.com.au
Anthony De Francesco, Managing Director of Real Investment Analytics. Mob: 0438 506 284 or email: anthony.defrancesco@rianalytics.com.au
Rob Ellis, Director of the Data App. Mob: 0417 195 352 or email: rob@thedataapp.com
About PAR Group
Real Investment Analytics (RIA), The Data App (TDA) and Y Research are partners in PAR Group, an independent research collective offering a comprehensive range of property research and analytical services. The team is experienced in economics, property research, transactional and corporate strategy; all with extensive industry involvement in both the property and finance sectors. Visit: http://par.group/ for more information.