What does Amazon’s arrival mean for Australian retail property?

Amazon is coming to Australia.
Amazon is coming to Australia.

Brace yourselves for Amazon.

The global retail goliath is heading down under in September next year, in a move that could deliver the biggest shake-up Australia’s retail market has ever seen.

Whether or not Amazon’s incursion is a good thing depends on your outlook, with the company reportedly planning to “destroy” Australia’s retail market.

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But the news isn’t all bad.

Here’s what it could mean for our local retail and commercial property industries.

Online shopping

Amazon’s entry into Australia is big news for online shopping in Australia, which remains low as a proportion of total retailing in comparison to other countries.

The impact will be far greater if Amazon decides to include grocery in their offering – a part of the market that has remained largely absent from online shopping, particularly in comparison to markets like the UK.

It will be good news for Australian consumers if the company is able to reduce prices as promised.

A boon for industrial

The Amazon decision will be good news for the industrial sector.

If successful, the company will require a large number of distribution centres, potentially around Australia.

It is likely that larger markets such as Sydney and Melbourne will see the first of these.

Bricks and mortar retail

If Amazon is successful, it will continue to drive innovation in the Australian retail sector.

In the same way that Australian retailers have had to adjust to a large number of international retailers entering the Australian market, there will continue to be pressure for retailers and shopping centre owners to innovate.

This may mean that many will fail if they don’t adapt.

Lower growth for shopping centres

Shopping centres are now places for people to spend a lot of their leisure time and are increasingly offering a range of cafes, restaurants and entertainment options.

An analysis undertaken by REA Group this month shows that house prices in suburbs close to large shopping centres increasingly outperform the rest of the market, driven by a desire for people to locate nearby.

Nevertheless, shopping centres will be impacted if Amazon is successful in Australia and, like retailers, will need to continue to adapt and get used to lower levels of rental growth.

Nerida Conisbee is the chief economist at REA Group.