Shopping centres weathering retail downturn

Demand for shopping centres will remain firm, despite recent retail sales data showing Australians are closing their wallets, according to commercial property consultancy Jones Lang LaSalle, which shows stable occupancy and rental figures for shopping centres.

The JLL figures showed vacancy rates for regional and sub-regional shopping centres were a stable 1% to 2%, while inner city CBD premises were running at about 2% to 3% vacancy. Rental income is also expected to remain steady with most occupants locked into longer term leases.

“With retail demand slowing, owners of enclosed retail centres may be concerned that rental growth will slow, but is worth noting that during the 2005 retail turnover slowdown, rental growth in most enclosed centres remained firm,” JLL head of forecasting services John Sears told The Australian Financial Review.

Sears cited three reasons for commercial property owners to remain positive:

• Retailers were switching to a lower margin and higher volume model in the softer consumer environment.
• Such a strategy demands more store locations.
• The strong Australian dollar would cushion pressure on margins.

The JLL Survey of Retailer Sentiment from November 2007 showed 85% of retailers had expansion plans for the next 12 months.

Famous global brands spurn Australia

A report by CB Richard Ellis showed that many famous global retail brands are yet to venture fully into the Australian market. The study, How Global is the Business of Retail, looked at the retail footprint of 250 leading international retailers, including Adidas, ZARA, Tiffany and Lacoste.

The study found that only about 25% of these high-end retailers had a presence in Australia, ranking us 32nd among the 62 countries examined, just ahead of Mexico and Malaysia, but behind Kuwait and Thailand.

CBRE regional director of retail services, Joshua Loudoun, believes a lack of suitable locations was one of the main obstacles for premium international brands establishing themselves in Australia.

“Typically a global brand entering Australia had only a limited choice of opening a store in the Melbourne or Sydney CBD, with few options after that, making it difficult to justify the investment,” he said.

However he says new markets In Australia are opening up in Brisbane and Perth as the commodities boom fuels income growth and spending power.

The potential to attract premium global retail houses is certainly there for commercial property operators.

“Many of the regional shopping centres are also now looking at the potential to add on luxury malls, which was seen recently with Chadstone in Melbourne announcing it has secured Louis Vuitton,” added Loudoun.