Food-Based Retail Stands Out as Hot Property

Developers, retailers and shopping centre managers are focused more on food-based retail real estate in order to improve centre performance.

According to JLL’s latest national retail survey, retail vacancy rates in neighbourhood shopping centres, which strongly feature food-based and non-discretionary based retailing, increased in the first six months of 2017 – from 2.6 per cent of vacancy in December 2016 to 3 per cent in June 2017. However, vacancy rates remained below the long-term average of 4.5 per cent reported across the 17 Centre Managers conducted to date.

[Related reading: Retail Trade Posts Worst Monthly Performance In Four Years; What’s On The Menu: Inside The Latest Food-Based Retailing Trends]JLL head of property and asset management Richard Fennell said being able to attract additional anchor tenants or mini-anchor stores was highlighted as improving the occupancy rates and rental income of some shopping centres.

“This is a strategy that works, along with changing the tenancy mix to include food-based retailing and services such as medical centres, financial services and travel agencies,” he said.

The Retail Centre Managers’ Survey was undertaken in August across 119 Australian shopping centres under JLL managementIt also revealed a slight improvement in sales growth expectations, with 53 per cent of respondents expecting some sales growth in the year ahead, up from 47 per cent in February 2017.

However most respondents expected growth to be no more than 3 per cent per annum.

JLL director of strategic consulting David Snoswell said national consumer sentiment was weak for an extended period of time.

“The Westpac-Melbourne Institute Survey of Consumer Sentiment has been below the 100 neutral mark between December 2016 and August 2017, dropping to a low point in August of 95.5,” he said.

“20 per cent of respondents to our survey said they expected a decline in sales turnover in the next 12 months and gave a range of reasons for this, including strong competition in the catchment they operate in, the loss of a key tenant and the need for the centre to be refreshed/refurbished.

“When we asked shopping centre managers what factors were impacting turnover performance, competition from other centres remained the key area of concern (with a net balance of -38 per cent), followed by online retailing (-25 per cent) and the economic outlook (-23 per cent).

“In contrast, the most positive factor for trading performance continues to be changes to the tenancy profile of centres to improve performance,” Snoswell said.