Foreign Retailers Swamp Australian Shopping Centres

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Tuesday, October 21st, 2014
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Even as overall market conditions remain subdued, an influx of foreign retailers and fashion brands is driving a race to beef up space within the shopping centre market in Australia.

In its third quarter Retail MarketView, real-estate services firm CBRE says international demand was the driving force behind plans to create more than 1 million square metres of regional shopping centre space over the next three years, including a 35,000 square metre expansion of Macquarie Centre in Sydney, a 29,800 square metre expansion of Westfield North Lakes in Brisbane and major extensions of Pacific Fair on the Gold Coast and Chadstone Shopping Centre in Melbourne.

CBRE head of research Stephen McNabb said the impact of foreign retailers, many of whom are pushing domestic retailers out of prime locations, cannot be understated.

“Foreign retailers often have larger than average store formats and they are demanding prime locations within shopping centres,” he said, adding that he expected all of Australia’s major shopping centres will eventually contain foreign retailers if they can accommodate them.

“To that end we’ve seen landlords increasingly look at how they can expand and redevelop their centres to accommodate this market segment. It’s created an extremely competitive environment in which discount department stores are needing to refresh and reinvent themselves to combat offshore fast fashion retailers who are taking an increased market  share.”

Around the world, interest in the Australian retail market is growing as the country’s market is seen as a natural bolt-on to a push toward Asia, as markets in the US and Europe are increasingly seen as mature.

A pivotal example can be seen through the transformation of the former Macquarie Centre in Sydney, which opened on October 16 and is said to be the first suburban centre in the country to have all of the big international fast fashion brands including H&M, Zara, Uniglo, Forever 21 and GAP.

Adding to that momentum are some demonstrated success stories: Stockholm-based fashion clothing outfit H&M, for example, reportedly turned over $21 million in its first eight weeks of trading after opening its first store in Melbourne in April.

The primary effect of this has been felt at the super-prime level, where CBRE reckons rents are up 3.6 per cent thus far this year and a whopping 12.5 per cent in Sydney specifically.

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More generally, however, CBRE expects rental growth to remain below historic averages as an early 2014 recovery in retail trading conditions wanes amid soft labour markets and a petering out of the effect of low interest rates and rising property values.

Department stores in particular continue to struggle, with virtually no sales growth in recent months and big names such as Myer undergoing a process of shutting down unprofitable stores.

By contrast, conditions are much better in the café and take-away sector, which is less affected by online competition and for which sales were up by around 10 per cent in the year to August.

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