The Future Centres On Boutique
Sydney Morning Herald
Saturday April 26, 2008
Sydney's shoppers have more money than ever - and canny companies plan to cash in, reports Yvette Nielsen.
Rising interest rates and the credit crunch are reducing discretionary spending as shoppers focus on buying the basics. However, the retail property sector sees better times ahead.New smaller, boutique-sized centres, along with larger shopping malls in Sydney and NSW, are adapting to meet the changing needs of consumers.Joshua Loudoun, regional retail director for CB Richard Ellis, published a MarketView report last month on the state of the Sydney retail sector in last year's fourth quarter.The report shows overall vacancy has fallen to a historically low level, while net face rents strengthened during the six months to the end of last year.Loudoun says the Mid City Centre and Westfield development covering much of the Pitt Street Mall precinct will be a key driver of expected strong rental growth during the longer term.Neighbourhood and sub-regional shopping centres should continue to draw increasing rents despite dominating new supply during the next few years, the report says. Regional centres are still likely to see growth, along with prime location strips and surrounding local areas that have record low residential vacancies.Developers of bulky goods centres, such as furniture stores, also have opportunities in the north-west and south-west corridors, identified as future growth areas over the medium to longer term in the Sydney Metropolitan Strategy."Certainly in inflationary environments people do slow down and focus more on everyday needs and I guess that's why smaller, neighbourhood centres benefit," Loudoun says. "They're not as reliant on discretionary spending."I don't think there's a stalling in retail sales. The Australia Retailers Association are expecting retail sales to be around 4.5 per cent this year and that's still very good growth and in line with the longer-term average. It's just that we're coming off the back of what has been very strong retail growth for maybe even six or seven years." Loudoun says Australia has had a dramatic increase in personal wealth during the past five years, driving an expansion by global luxury brands such as Tiffany, Prada, Chanel and Louis Vuitton, which are looking at suburban or regional shopping centre opportunities and new markets such as Perth and Brisbane.Other international brands, such as high-street fashion houses from Europe and Britain, are attracted to new developments with ample floor space such as Westfield in Centrepoint.Boutique centres are also capitalising on the changing times. Craig Minahan, executive director of Ashington, which developed the former post office at Potts Point, says people and populations are always the ultimate drivers for retail spending. He says the changing population of inner-city Sydney is reflected in the supermarkets, cafes, restaurants, consumer durables and fashion."They might be spending a little bit less but as long as you get lots of people through or passing by - and they've got a requirement to feed themselves or buy new products - then they'll spend money."Stephen Bowrey, retail manager for Colliers International, says a boutique development last year on the former Westpac bank site at 376 New South Head Road, Double Bay, is evidence of the trend to branch out."The economic landscape has changed in the past six to 12 months [but] boutique developments in the eastern suburbs still remain pretty strong," Bowrey says.Stamford Property and Colliers are redeveloping the Cosmopolitan centre in the heart of Double Bay. The 28 luxury apartments and 30 specialty shops, ranging from 25 to 300 square metres, will be completed towards the end of this year and early next year. The centre has already secured several international quality brands and hopes to attract mid-price fashion brands not yet in Double Bay.Bowrey will soon be seeking expressions of interest for food outlets including a trendy upmarket line bar-restaurant cafe catering for 35- to 50-year-olds who enjoy eating out on "the scene"."I think there's a shift back to strip retail, probably mostly to do with our climate," he says. "People want to be seen, particularly in the areas like Paddington and Double Bay, and they want to be able to go outside and have coffee and enjoy the strip-type shopping experience as opposed to the big shopping centre malls."Bowrey says strip centres allow retailers to expose their brand to the street and the passing traffic.Peter Seeto, a retail leasing director with Jones Lang LaSalle, says brand saturation in the larger centres is another reason retailers are looking further afield to set up shop."At a recent retail breakfast held by Jones Lang LaSalle in Sydney it was apparent by our panellists that they are keen to expand to show growth to their shareholders," he says. "And the expansion would not be in the major shopping centres where they've found saturation point but in the smaller regional areas. Particular brands can only open so many stores in a given shopping centre - the expansion needs to come from spreading their wings further afield and increasing their networks."Smaller retail groups were seeking to expand their brands but the push was predominantly from larger publicly listed groups. Seeto says that while city fringe centres would benefit faster from the expansion, more regional centres would also pick up business. He says the northern beaches are already showing strong growth as is the north-western corridor."A number of international brands are seeking access to Australia and while they're opening in a new country they're very mindful of occupancy costs and sometimes the street locations and larger mall entries are favourable," Seeto says.
© 2008 Sydney Morning Herald
