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Landlords urged to fill vacant shops with gyms, child care centres

The rise of online shopping and closure of major incumbent retailers will continue to impact Australia’s retail industry in 2019, according to a new report from CBRE.

The real estate firm noted in its Australia Real Estate Market Outlook report that that 22 major retailers have left the market or entered voluntary administration in 2018. And while online shopping currently accounts for 9 per cent of Australia’s total retail trade, it is expected to reach 12 per cent by 2022.

Bradley Speers, CBRE’s head of research for Australia, recommended that landlords faced with vacating tenants look to re-purpose some retail space into service-based offerings such as gyms, child care and entertainment offerings.

This is in line with the broader industry trend of shopping centres repositioning themselves as destination centres – in the hopes of offering an experience that cannot be replicated online, while also diversifying their tenancy mix away from traditional retail and towards service-based offers.

Additionally, a slowdown on residential property construction, as well as the falling prices for housing, is to have a flow-on effect on the retail industry in 2019.

According to the report, sales in the household goods category grew by about 2 per cent in 2017-18, compared to the average annual growth of 6.2 per cent for the preceding three years, while sales of hardware, building and gardening supplies have grown – signifying a move towards dwelling renovation efforts, rather than re-furnishing.

Population growth, especially across the eastern coast of Australia, is driving investment in neighbourhood centres in urban areas, with 250,000sqm of new neighbourhood space to be completed in 2019, 50 per cent higher than the amount delivered in 2018.

Cushman & Wakefield, in its Australian Retail Investment Report, said it expects the trend of major retail property players divesting non-core stock, such as Vicinity shifting its focus onto core assets, to continue in 2019.

“Sub-regional shopping centres appeal to investors due to the attractive returns, where average initial yields of 6.6 per cent were recorded in 2018,” the report stated.

“However, the yields also reflect the underlying risk with exposure to discretionary tenants such as under performing discount department stores and the threat of online retail.”

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