JLL’s latest Retail survey shows shopping centres continue to shift their offering to food, services, entertainment and leisure to counter key themes impacting sentiment. Food operators continue to drive tenant enquiry while online retailing continues to be a key headwind for fashion.
AUSTRALIA, April 9, 2018 – JLL’s latest research on shopping centre management has found landlords continue to transition their tenant profiles with retailers who are less likely to be disrupted by online retailing.
JLL’s 18th Retail Centre Managers’ Survey was undertaken in February across 106 JLL-managed retail shopping centres nationally. The majority of centres were neighbourhood and sub-regional centres.
The main concerns being highlighted by Centre Managers as impacting their future turnover performance have remained constant during 2017 and 2018 to date. These are: competition from other centres, followed by online retailing, fuel prices and the economic outlook.
JLL’s Head of Property & Asset Management – Australia, Richard Fennell said, “When we asked Shopping Centre Managers what factors were impacting turnover performance, competition from other centres remained the top concern, with online retailing again in second spot, for the third survey in a row.
“We found that a number of landlords are transitioning their tenant profiles with retailers who are less likely to be disrupted by online retailing.
“A number of centres are shifting their offering to food, services, entertainment and leisure uses and focusing on marketing initiatives to drive customer traffic. In addition to food and beverage operators, it’s health, gyms, medical centres, other medical-related services and insurance that are expanding in shopping centres.
“However, in some centres the amount of food and beverage tenancies has begun to create competition for existing operators. And the expanded offering of the supermarkets has started to result in lower demand from speciality food retailers.
“But overall, food operators continue to drive tenant enquiry levels while online retailing continues to a key headwind for the fashion segment,” said Mr Fennell.
Promotional discounting remains a major drag on retail sales growth, with prices for ‘clothing and footwear’ having declined by 3.0% in the year to December 2017 and having declined by 0.8% for ‘household goods’. However, the non-retail categories of household consumption continue to record the highest price increases, including Education, Health and Housing, all of which are major components of household budgets.
JLL’s Director of Retail Research, Andrew Quillfeldt said another key result from the survey was an improvement in tenant enquiry, albeit from a low base, and Centre Managers were a bit more optimistic on the outlook for retail sales growth over the next 12 months.
“Centre Managers are more optimistic on retail sales growth in their centres over the next 12 months compared to the previous surveys, with more than half (56%) expecting an increase. “Planned refurbishments, tenancy profile changes and growth in the trade area were driving factors of the improved trading expectations.
“Total shopping centre MAT (Moving Annual Turnover) growth improved marginally but remains generally subdued. Sub-regional centres recorded growth of 1.0% in the year to December and just 0.2% in neighbourhood centres.
“Specialty store rental growth continues to be relatively constrained by subdued retailer demand. The market remains favourable to tenants in most centres. However, 37% of Centre Managers anticipate some level of rental growth in speciality rents over the next 12 months while 43% believe rents will stay the same over that same period,” said Mr Quillfeldt.
Rental growth was found to be more consistent between the two main categories of shopping centres surveyed. Sub-regional speciality rents grew by a modest 1.1% in the year to December 2017 – the lowest figure reported in the last eight surveys and below the current rate of inflation (1.9%). Neighbourhood centres reported a growth rate of 1.2% in the year to December 2017, up from -0.9% in the year to June 2017.
Read the full survey here.