THE number of specialist retailers will diminish as part of a fundamental shift in Victoria's retail property market landscape as consumers continue to focus on value for money, according to the Australian Property Institute (Vic) Victorian Retail Update.
The update said as the sector recovers, convenience oriented and expanded format retailers will emerge as the winners.
API (Vic) spokesperson Aldo Galante said greater transparency of international price differentials in goods would maintain pressure on retail margins and subsequently occupancy costs, slowing rental growth, particularly in secondary centres.
“Smart phone technology, internet comparisons and exposure from increased overseas travel will continue as a deflationary force. Retail property market expectations remain weak according to recent research. Current sentiment suggests the market is also oversupplied and will remain so throughout 2013, and that there is little prospect for rental growth in the near term,” he added.
Galante said recent retail turnover trends suggested an increase in convenience oriented retailers, including supermarkets, takeaway foods and bottle shops.
“However, chastened by recent experience and constrained by continued high debt levels, consumers are likely to remain cautious and selective,”
He pointed out that the latest Australian Bureau of Statistics data found that specialised food retailers recorded a 21% slump over the latest year, with an average annual contraction of 4.3% over the five years to date.
Furniture, floor coverings, house ware and textile goods retailers recorded a 8.5% retreat in turnover year-on-year, and negative 0.6% turnover growth over the past five years, whilst book stores and newsagencies recorded a 1.9% dip over the year and a negligible 0.3% annual turnover growth in the past five.
“We expect to see fewer specialised retailers, such as butchers, bakers, delicatessens, green grocers, furniture, home wares, floor covering stores, newsagents and book stores.
“At the end other end of the spectrum, supermarkets recorded a robust 6.7% turnover growth in the latest 12 month period, according to the ABS. New, larger format supermarkets incorporating an expanded fruit and vegetable, delicatessen and bakery offer likely account for the loss of trade by specialised food retailers,” he predicted.
In new neighbourhood centres, the API expects to see some specialty stores replaced by mini majors.
Galante said the pain of the global financial crisis in the past five years had been unevenly felt, with vacancy increases to date largely focused in retail strips and smaller neighbourhood centres, whilst regional centres maintained near full occupancy.
There were 10 sales of Victorian shopping centres over $10 million throughout the past 12 months, with an aggregate value of $592 million.
“Two sales in regional shopping centres accounted for over two-thirds of transaction value in the $10 million-plus category. Centro Retail Fund realised $207.425 million from the sale of a half-share of The Glen Shopping Centre in Glen Waverley to Perth based Perron Group, reflecting a passing yield of 6%. AMP Capital sold a 20% stake in Westfield Knox Shopping Centre for $201 million to the Westfield Group and Westfield Retail Trust on a 6.66% passing yield,” Galante said.
He said that in sharp contrast to the pre-GFC period, institutional investors were net sellers, dominating the vendor profile; purchasers comprised a mix of listed property groups, private investors and retail developers.
“Retailers Bunnings and Coles Group were active, securing site for new store openings,”
Galante said the arrival of major new international retailers and radical changes to the Victorian planning system are set to further transform the retail landscape in the near term.
“While the process of structural change in the industry continues, with ongoing pressure from struggling retailers for lower occupancy costs on threat of further store closures, a sharp rise in consumer confidence in recent months lends hope that a retail recovery is approaching.
“Retailers such as ALDI, Costco and Masters are set to benefit from the introduction of more flexible retail zoning, whilst the removal of the floor space cap at principal activities will facilitate the further expansion of centres such as Chadstone,”
He said the retail zoning changes about to be enacted would potentially transform bulky goods centres to hitherto un-represented US-style power centres, incorporating large format fashion, footwear and accessory retailers.
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