Foreign demand for Australian retail property is set to continue into 2015 as international retailers continue to look to markets within the Asian region for new growth, according to a new report.
In its Global Retail 2014 highlights, research outfit Colliers International says ‘reinvigorated’ city centres had been a key factor behind an increasing push on the part of major foreign retailers and fashion brands to enter the Australian market.
“Led by its reinvigorated city centres, Australia is increasingly seen as an important retail market in the region,” the Colliers report said.
“International retailers are drawn to CBDs as their first choice for flagship store openings, which has re-established city centres as premier retail destinations and kicked off a new wave of CBD retail refurbishments and expansions.”
After several years of subdued conditions, a wave of foreign investment has been pouring into the local market of late.
In April, both Stockholm-based fashion clothing outfit H&M and Japan’s Uniqlo opened their first ever Australian stores in Melbourne. Last month, the newly transformed Macquarie Centre in Sydney opened with a variety of big international fast fashion brands, including H&M, Zara, Uniqlo and GAP – the first suburban shopping centre to do so, according to real-estate services firm CBRE.
More is set to come. In Sydney, for example, Forever 21 recently signed off on a 2,700 square metre lease at the World Sydney Arcade for one of its largest stores in the world, while H&M plans to open a three-level 5,000 square metre store at the mall’s Glasshouse centre in June next year and San Francisco beauty projects outfit will open its first Australian store next month.
Moreover, a number of other international brands are said to be looking at Australian CBD markets, including River Island, Marks & Spencer, Hamley’s, Sony and Microsoft.
The effect of this is reflected in rents at the super-prime level, which CBRE said last month had increased by 3.6 per cent thus far this year and by 12.5 per cent in Sydney specifically.
Still, Colliers reckons a lack of suitable space will serve as a constraint on development, with suitable locations often taking years to find and secure.
Moreover, CBRE expects overall rental increases to remain well below 10-year averages as soft labour markets impacted retail trading conditions, with department stores in particular continuing to struggle.
Beyond Australia, Colliers says the global outlook for retail is promising with an ongoing recovery in the United States and growing development in emerging markets, albeit with ‘bricks and mortar’ retailers having to deal with threats associated with online commerce.