The mix of tenants leasing space in large format retail centres is diversifying in the wake of the online shopping, the Masters collapse and the revamp of old Bunnings sheds.
Gyms, restaurants, bottle shops and pet supplies are all moving into the centres once dominated by furniture and electrical goods. The Large Format Retailers Association estimates annual sales in the sector make up 22.2 per cent of all retail spending or more than $68.2 billion.
But while NAB’s Online Retail Sales Index shows internet sales increased 15 per cent since February 2017, spending on household goods and electrical appliances held steady, increasing slightly to 10.7 per cent from 10.4 per cent.
The Home Consortium joint venture which paid $830 million for a string of former Masters stores in Queensland, New South Wales and Victoria is also pursuing the diversification strategy.
Home Consortium chairman David di Pilla said “diversification is on everyone’s radar. We need to attract more daily needs traffic, not just furniture-shopping.”
“People still need to eat and shop. We’re looking actively at gyms, food and beverage and even government services,” Mr di Pilla said.
“These prominent locations are being used to bring services closer to consumers. It makes sense what’s going,” he said.
Up to 800,000 square metres of new large format retail stock is in the pipeline in the next five years, according to research by Savills Australia, much of it in NSW where developers are hoping for a change in planning regulations that have stymied the sector’s evolution.
In Melbourne’s south-eastern suburbs, the Chinese-backed Ouson Group has built a new centre on the old Bunnings Warehouse at 754 Princes Highway in Springvale.
The newly renamed Ouson Plaza is just down the road from the new Bunnings and the Springvale Homemaker Centre, a 72,000 square metre joint venture between Harvey Norman and Ikea. The magnetic pull from these massive centres meant a new strategy was essential.
Agents Burgess Rawson fully leased the 16,000 square metre centre ahead of its October opening to a range of tenants, including a 1700 square metre Aldi supermarket, a 2200 square metre Good Guys, a 2000 square metre Crunch Fitness and a 918 square metre Best Friends Pets store.
But a 600 square metre Paesano restaurant, a McDonalds and a 200 square metre Bottlemart are also part of the offering which helps generate some evening use in a quiet pocket of suburbia.
Burgess Rawson leasing director David Mark said “Capitalising on the high passing traffic, substantial car park and large built form we were able to attract strong interest from retailers, all within a six month leasing campaign.
“Overall the project provides a WALE of 12 years with a 128 per cent lift in net income,” Mr Mark said.
“Bunnings Warehouses are beginning to outgrow their original sites. There is significant market potential to convert otherwise dormant sites into active retail and lifestyle centres,” he said.
The diversification trend has moved with renewed investor interest in the sector which turned over $1.63 billion in investment transactions in 2017 – 18 per cent of the total retail deals for the year, according to research from Savills and more than double the yearly average of $750 million.
The total was boosted by eight significant $50 million-plus deals, the biggest made by Brett Blundy’s listed Aventus Property Group which paid $436 million for two home-maker centres in Castle Hill and Marsden Park in Sydney. Aventus now has 20 centres in its portfolio worth $1.85 billion.
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Originally written by Nicole Lindsay, Sydney Morning Herald