Retailers ride $8 billion redevelopment boost
Australia’s CBD and regional shopping centres will continue to expand to accommodate an influx of international retailers, a new report says.
About $8 billion worth of redevelopments and extensions are expected to be carried at shopping centres across the country over the next five years, with demand from offshore brands at an all time high.
CBRE’s latest Marketview report says landlords are shifting into development mode after 10 years of relative inactivity, with expansion either underway or expected to begin soon at New South Wales’ Westfield Chatswood, Westfield Warringah Mall and Chatswood Chase and Victoria’s Eastland and Westfield Knox.
CBRE retail services national director Alistair Palmer says international retailers are having a pronounced impact on the local market, with Australa’s major shopping centres well positioned to capitalise.
Rents are forecast to grow by 1.5% over 2015, 1.8% over 2016 and 2.2% over 2017
“The big game changers are likely to be Pacific Fair on the Gold Coast, Chadstone VIC and Castle Hill NSW,” Palmer says.
Pacific Fair will grow its footprint from 100,000sqm to 150,000sqm by the second quarter of 2016 and will welcome a string of new fashion stores and a high-end luxury precinct.
Chadstone, already the largest shopping centre in the southern hemisphere, is expanding from 175,000sqm to more than 200,000sqm in a move that will boost its offering of luxury stores and increase its annual turnover from $1.4 billion to $1.8 billion.
Palmer says some landlords are achieving higher returns by developing existing assets rather than investing in new ones.
“Returns on development projects are likely to be approximately 9%, rather than 5% for purchasing existing centres,” he says.
“By positioning centres to appeal to the changing buyer demographic, owners can often achieve a higher return out of new retailers who take less space than department and discount stores and have far higher turnover rates per square metre.”
CBRE’s Australia head of research Stephen McNabb says the increased interest from foreign brands and growth in retail sales had seen small increases in rents during the second quarter of 2015.
Whilst further rent growth is expected in (the second half of 2015), we believe retailers are resisting large rental increases amid profit margin pressures as retail price inflation is still low,” he says.
“Rents are forecast to grow by 1.5% over 2015, 1.8% over 2016 and 2.2% over 2017.”