, while deprioritising food, technology and entertainment. Fashion Spree, an outlet centre in the Western Sydney suburb of Liverpool that opened in 2016, is a case in point. Initially with 10,500 sqm of net leasable area, Fashion Spree is set to expand by another 4,500 sqm, incorporating more than 20 new shops. All except one will be new fashion brands. A children’s playground external to the centre’s main building is also in the plans but this is not tokenism. It’s functional – it’s so spouses can keep the kids happy while their partners shop inside. The focus on fashion brands was also evident in the 2017 makeover of Mirvac’s Birkenhead Point outlet centre on Sydney Harbour. Mirvac upscaled the tenant mix with luxury names including Bally, Coach and Michael Kors, and also brought in Australian streetwear retailer Zanerobe. The penchant of factory outlet operators for bringing in more apparel and footwear runs roughshod over current industry theology, which has been hijacked by technology advocates and riddled with vague promises by many mainstream shopping centre owners to create ‘community’ in their centres. Factory outlets are unashamedly not about fostering community or technology – they’re about creating shopping experiences, pure and simple. And by and large, the strategy has worked, with productivity at a number of Australian outlet centres topping or approaching the magic $10,000 per square mark. Foot traffic and sales are on the rise and demand by retailers for high-quality outlet space exceeds supply, as retailers begin to take the Australian outlet channel more seriously. Does this mean we can expect a lot more than just the current 19 of these centres in Australia? Where are the department stores? One of the constraints of the expansion of the Australian factory outlet business has been the availability of retailers. In developed markets overseas, outlets have long been big business, with retailers chasing locations and migrating across the Atlantic between the US and Europe to secure them. Many retailers in the US created internal units that merchandised exclusively for the outlet business. By the beginning of this decade, ‘made-for-outlet’ merchandise was accounting for more than 50 per cent of the stock in US outlet stores. Outlet stores were no longer a dumping ground for clearance merchandise from the mainline stores. This is not so far a trend in Australia. Clearance is still the predominant merchandising method for the brands that are here – and not all of them have arrived yet. But there is an even bigger factor restraining growth of factory outlet centres – the absence of the department store players. Many high-profile department store companies in mature markets overseas have derived virtually all of their growth in recent years from off-price stores in outlet and other value-oriented centres (think Nordstrom Rack and Macy’s Backstage). These outlet department stores are typically single-level, with a footprint maxing out at around 5,000 sqm, compared with the three-level 10-18,000 sqm behemoths in mainline shopping centres. Still, if you have even two or three of those signed up, you have the makings of an outlet centre right away. In contrast, Australia’s department stores have stayed away from factory outlet centres. Myer is not represented in outlet centres and the only David Jones outlet stores – frumpy units in Harbour Town Gold Coast and Birkenhead Point in Sydney – both exited the business about five years ago. Not enough places to go Another part of the problem for factory outlet centres in Australia is a scarcity of locations. Planning regimes in Australia have made it a deliberate matter of policy to cram retail into so-called ‘activity centres’, where high land costs can be at odds with the factory outlet business model. One option has been to open factory outlet centres on federal airport land. DFO Perth, the latest factory outlet centre to open in Australia, is located at Perth International Airport. In fact, of the 504,000 sqm of outlet leasable area in operation in Australia at the end of 2018, approximately 147,000 sqm of it, or almost 30 per cent, was on airport land. This land is less expensive than that zoned for retail in activity centres and it isn’t subject to state and local planning regimes, making the permit process easier than for a shopping centre located in an adjacent neighbourhood. This has naturally raised the ire of some operators of mainstream shopping centres, who believe that the playing field is tilted against them when outlet operators are able to dodge the rules that govern everyone else. For their part, the airport operators embrace factory outlet centres as part of their initiatives to encourage commercial development on land that is surplus to aviation requirements. Many airports have large set-asides for non- aviation uses, which includes factory outlets, bulky goods and office space, among others. Brisbane International Airport, site of a 26,300 sqm factory outlet centre, is a good example. Leonie Vandeven, a spokesperson for Brisbane Airport Corporation that operates the airport, says: “A key strategy for Brisbane Airport is creating a unique place to attract and connect businesses, workers and visitors, while also creating significant and diversified economic generators through precinct developments.” Perth Airport CEO Kevin Brown is This land is less expensive than that zoned for retail in activity centres and it isn’t subject to state and local planning regimes, making the permit process easier than for a shopping centre located in an adjacent neighbourhood. This has naturally raised the ire of some operators of mainstream shopping centres, who believe that the playing field is tilted against them when outlet operators are able to dodge the rules that govern everyone else. For their part, the airport operators embrace factory outlet centres as part of their initiatives to encourage commercial development on land that is surplus to aviation requirements. Many airports have large set-asides for non- aviation uses, which includes factory outlets, bulky goods and office space, among others. Brisbane International Airport, site of a 26,300 sqm factory outlet centre, is a good example. Leonie Vandeven, a spokesperson for Brisbane Airport Corporation that operates the airport, says: “A key strategy for Brisbane Airport is creating a unique place to attract and connect businesses, workers and visitors, while also creating significant and diversified economic generators through precinct developments.” Perth Airport CEO Kevin Brown is similarly enamoured: “The new DFO Perth marks the start of an exciting phase in the evolution of Perth Airport. It is the first of a number of retail opportunities that we look forward to developing on the airport estate in line with our master plan.” The centre houses 113 Australian and international brands, including the first appearance in WA of Coach, Polo Ralph Lauren, Tommy Hilfiger, Furla and Kate Spade. However, there are limited prospects for more airport factory outlet projects elsewhere in Australia, despite the fact that hundreds of regional airports around the country have surplus land and are actively seeking non- aviation-related activities to make them economically viable. Most are located in areas that cannot support a major retail project like a factory outlet centre. A factory outlet centre is in the master plan for Parafield, an airport in suburban Adelaide, and for Hobart Airport in Tasmania, but so far no centre has emerged in either location. That leaves the existing factory outlet centres with a huge opportunity to grow their businesses. And while mainstream shopping centres fuss about technology and community, factory outlets are forging ahead with what they know how to do best: sell branded merchandise at a discount. Michael Baker is a Sydney-based retail consultant and former head of research at the International Council of Shopping Centers. michael@mbaker-retail.com