Good Things Come in Large Packages

Large Format Retail (LFR) sales so far in 2022 have been a huge success story at Burgess Rawson. As a result of some record sales and yields achieved, we have consolidated our place as a market leader in the category.

“We’ve really raised our game in the LFR category. The team have worked incredibly hard and been more active in the Large Format Retail Association… and it shows. The calibre of listings is extremely high and the sales results and yields achieved this year have been phenomenal.”

“As more top vendors are choosing to list with us, we are excited about the opportunities we have in the pipeline for investors,” said Burgess Rawson CEO Ingrid Filmer.

So, What is Driving Success and Interest in Large Format Retail?

Momentum in the category was steadily building as investors were attracted by the long leases offered to major national retailer tenants.

However, the pandemic, the suburban sprawl and population growth in the regions have intensified demand for LFR investment.

Other factors that have piqued investors interest:

The scale of LFR sites and improvements – by definition, they are “large”, and this provides investors with an inherent value proposition relative to other asset classes
Asset category resilience demonstrated during the pandemic – larger amenities and ample parking provides easy store access enabling social distancing
A tightening of vacancies in the LFR leasing market
Stronger sales performance by “discretionary” retailers – Australians diverting overseas travel expenditure to big ticket appliances, furniture, auto and household goods
Increasing rents due to low supply
LRF locations – strong growth forecast in growing outer city areas and the regions

The Great Rise of Large Format Retail

The LFR category has seen significant growth in the last two years – not just weathering the pandemic but reaching new sales highs. In FY22 LFR is estimated to have accounted for 25.5% or $92.4 billion in retail sales and compromises a huge 35% of total retail floor space.1

Location, accessibility and big retail brand presence have always been the big drawcards to retail hubs where consumers are encouraged to touch, feel and compare products, and transfer their purchases to the car park directly outside.

Large Format Retailers Fared Very Well During the Pandemic

LFR retailers have been able to capitalise on these attributes during the pandemic and they were quick to adapt to COVID-19 restrictions during lockdowns. Spacious warehouses with ample parking in the outer suburbs or regional locations have easily accommodated social distancing and non-contact click and collect.

The sector is a big winner of the transition to remote and flexible working. As white collar jobs move from city offices to home offices, demand for office supplies and furniture increases dramatically.

Growth populations in outer metropolitan growth areas and regional towns that have welcomed new residents from the cities, particularly in the last two years. This has created further churn in the broader residential property market, delivering significant uplift in LFR spending to the regions as residential buyers personalise and upgrade their new homes.

This has not been lost on LFR property investors. “We are seeing record results in regional locations, particularly for Large Format Retail freehold tenanted by top tier brands,” says Billy Holderhead.

“Most retailers in the LFR sector are classed as ‘discretionary’, but COVID-19 has completely tipped that on its head with record sales performance reported right across the LFR sector,” said Mr Holderhead.

The big winners have been in after market auto accessories, homewares, hardware and gardening, with record sales results in the last two years2. The following major retailers achieved strong sales growth achieved between the first half of FY20 and FY22:

Bapcor Retail (Autobarn, Midas, AutoPro and Burson) up 36.7%
JB Hi-Fi Limited for both its retail brands; JB Hi-Fi Group increased by 21% and The Good Guys 25%
Wesfarmers stablemates Bunnings and Officeworks recorded growth of 26.5% and 28.1% respectively
BCF achieved an incredible 47% sales uplift
Super Cheap Auto up 11.9%

The Large Format Retail sector offers outstanding freehold investment opportunities across a broad range of price points and the popularity of the asset class will only rise amongst investors as the sector continues to mature.

Burgess Rawson’s newest LFR freehold investment offering is the only Autobarn on the Mornington Peninsula (Victoria), which will be auctioned at Crown Casino on Wednesday 14 September.