Trends such as click and collect, food delivery services and ride sharing are influencing how new shopping centres are designed, built and managed, finds fresh research from JLL.
“Changes in demographics, social trends and consumer spending habits will have complex implications for the design, supply and management of shopping centres over the long term,” says JLL’s Australian head of retail, property and asset management, Tony Doherty.
JLL’s Shopping Centre Investment Review and Outlook 2019 finds retail transaction activity reached 8.1 billion in 2018, the third highest level on record.
Owners are focusing on reducing exposure to low-growth assets and redeploying capital into new acquisitions or redevelopment projects.
John Burdekin, JLL's head of retail valuations and advisory, says 2018 is “likely to have been the high point for values in this cycle with some record low yields having been achieved”.
“However, the market has reached an inflection point where some assets are now selling for below book value.”
JLL’s report outlines several consumer trends reshaping the retail sector. Chief among these are ‘click and collect’, food delivery services and ride sharing, which have implications for design and layout of shopping centres and redevelopments.
Urban retail is also likely to grow as capital cities densify. Expect more mixed-use retail development above or around key transport nodes or in major commercial and residential buildings. JLL’s report identifies potential for specialisation, such as community retail centres in suburban areas that provide key services such as childcare, gyms and other health facilities.
Food and beverage remains a major driver of tenant demand and leasing activity in shopping centres, and according to JLL, the latest ABS figures reveal the category has grown by 5.9 per cent per annum over the last 20 years. In comparison, total retail spending has grown 4.7 per cent.
“The outperformance is even more pronounced over the past 10 years to January 2019, at 5.2 per cent versus 3.3 per cent per annum,” Doherty adds.
“The long-term generational shift towards dining out is supporting the reallocation of space to food and beverage offerings.”
According to Andrew Quillfeldt, JLL’s director of retail research, shopping centre owners continue to deploy capital into innovative and creative developments to drive consumer engagement, generate retailer interest and drive sales productivity.
“Refurbishments of existing space are increasingly becoming the focus, rather than major extensions,” Quillfeldt says.
“Owners and developers will be looking to capitalise on the segments of the market which are performing well for leasing opportunities – F&B, entertainment, retail services, sports and recreation as well as health and lifestyle uses such as gyms.
“We believe more redevelopment projects with major extensions will be revised, scaled back or pushed-out as a result of below-trend retail sales growth and a yield compression cycle which is no longer supportive of development.
“A supply slowdown, in terms of the creation of new floorspace, will be supportive of retail conditions moving forward given vacancy rates remain relatively low.”