No, they are not a dying breed – shopping centres are just reinventing themselves.
Although one couldn’t be blamed for thinking that retail landlord’s prized possessions are on the way out, with store closures being announced in some parts of the world almost weekly.
According to a study by Credit Suisse, 25 per cent of malls in the United States are estimated to close by 2022.
However closer to home, retail landlords and property developers have started to rethink the mall concept, integrating different property types in hopes of achieving higher occupancy rates and higher rents.
“Traditional retailers have struggled over the past five years, faced with constant pressure from online competitors,” IBISWorld industry analyst William McGregor told Inside Retail.
McGregor said with the new shopping habits of consumers, developers needed to evolve to avoid being a thing of the past.
“New retail developments have turned to different sources of revenue to improve their longevity, adding residential spaces to malls and shopping areas,” he said.
Chadstone Shopping Centre in Melbourne, for example, will likely add residential or office spaces as part of its tenancy mix over the next decade, he said.
In August last year, Scentre Group and Cbus Property purchased the David Jones Market Street building in Sydney’s CBD for $360 million, which they have planned to develop into a luxury retail space and luxury residential tower, although construction for the site won’t commence until David Jones’ lease expires in late 2019.
Scentre’s share of the purchase price is $182.5 million with Cbus Property paying the balance of $177.5 million, the Scentre Group stated.
The department store retailer will continue to occupy the site until late-2019 under a lease agreement providing a 4.5 per cent per annum rental return on the acquisition price. During this period, co-owners Scentre and Cbus will obtain the necessary approvals to redevelop the site when David Jones vacates the building.
Upon completion, the redeveloped 77 Market Street site will comprise approximately 10,000sqm of luxury retail space integrated with Westfield Sydney, and Cbus Property converting the balance of the existing building to provide quality office space and develop a luxury residential tower above, overlooking Hyde Park.
Scentre Group will own, develop, design and build the retail elements of the site.
Integrating different property types around a shopping centre will offer both tenants and residents convenience. By having both workers and residents on site, retailers will have increased foot traffic while consumers will have the convenience of doing their shopping nearby as well as have access to multiple retail and dining options in the area.
Redeveloping malls is now a trend that shows no signs of slowing down, and retailers and developers are staying on their toes to always be one step ahead of consumers’ shopping and housing preferences.
McGregor said even department stores had to reinvent themselves to attract consumers’ attention.
“Over the past five years, demand from department stores has declined,” he said. “As consumers continually bargain hunt, department stores are looking to adapt their operations, offering experiences over just pure shopping.”
He cited David Jones as an example, which has added food courts to their premises and highlighted how shopping centres and new developments are looking to remix shopping spaces, by moving away from the traditional mix of pure retail outlets.
“Consequently, developments will likely implement residential-retail mixes in the future as demand for traditional retail space changes.”
In other parts of the world, it can be difficult to draw a line between city living and mall spaces. In Hong Kong, for instance, malls are being sandwiched in between train stations, which consumers can visit in between stops.
The obvious demand for housing, especially in certain markets, have made retail landlords lean more toward the idea of creating residential spaces closer to their consumers.
“As Australia’s population continues to grow, state planning frameworks have addressed the need for more housing,” said McGregor. “For example, in November 2016 the ‘Towards our Greater Sydney 2056’ plan, stated the city would aim to accommodate 1.74 million additional people over the period.”
McGregor added in order to insure there is not an oversupply of employment, however, the report addressed the need to ensure developments balanced residential supply with commercial, retail and light industrial spaces.
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