Property Australia

Retail’s road to recovery

Karen Jamal Karen Jamal September 14, 2021

Australians are spending their discretionary income, larger retailers are posting sales growth and loyal customers continue to seek out bricks-and-mortar. All these trends point to a rebound for retail, says Colliers.

 

  Three key takeaways

  • Online retail spending grew by 43% over the year to June 2021, according to Colliers’ latest research report, The future of retail demand: The road to recovery.
  • But retailers with a physical storefront account for 62% of all online sales.
  • A two-tiered CBD retail market has emerged, with high street retail – especially flagship stores on prime sites – weathering the storms of COVID-19 better than subterranean locations reliant on international tourism and CBD office workers.

 

While online retail spending hit an all-time high in July, contributing 12.6 per cent of total Australian retail turnover, Colliers is not calling time on the shopping mall.

Instead, people will return to bricks-and-mortar shopping to fulfil their social and retail needs, and Colliers expects to see a rebound in retail once vaccination levels increase and freedoms return.

Despite the latest retail trade data from the Australian Bureau of Statistics in July showing a 2.7 per cent decline in month-on-month retail sales nationally, sales grew in some states – notably Victoria (1.3%) and Western Australia (1.2%).

150921 - Story 2 - National Online Retail Sales

150921 - Story 2 - Michael Bate“People are still spending despite being home and retailers have adapted very quickly,” says Michael Bate, Colliers’ head of retail.

The future of retail demand: The road to recovery finds consumer power is at an all-time high and retailers are under pressure to meet growing expectations for convenience, service and value.

“Consumer loyalty has played a key role throughout the pandemic period,” notes Adrianna Kazzi, Colliers’ senior analyst and the report’s author. Retailers with a physical storefront account for 62 per cent of all online sales, a result that is “based on consumers’ trust and loyalty and the ability to use multiple mediums to finalise purchases”.

Online sales growth has driven investment in dark stores and advanced technology, Kazzi adds, pointing to Woolworths Group as an example. The grocery giant’s micro-fulfilment centre, a 2,400 sqm space behind an existing Melbourne supermarket, is equipped with technology that sorts and moves products from automated storage units directly to the staff that are hand-picking custom orders. “The micro-fulfilment technology increases the dispatchment of online orders by five times that of a regular supermarket,” Kazzi says.

Department stores posted increases in sales, notably Myer (5.5%) and David Jones (2.3%) but Colliers says150921 - Story 2 - Adrianna Kazzi large format retailers have reaped the biggest rewards. These retailers account for 9.5 per cent of industry revenue following the spike in house sales and building approvals that led to consumer demand for household items. JB Hi-Fi, The Good Guys and Baby Bunting are just three that have announced plans to grow their store networks, Kazzi notes.

Colliers highlights the “two-tiered” impact on retail, especially in CBDs, with high street brands buoyed by online sales and poised to prosper when lockdowns lift. Subterranean locations, which tend to experience higher vacancy rates, may take longer to recover.

Shopping centre owners are taking action and landlords are on the hunt for medical, office and education related tenants. “All major landlords that have significant portfolios throughout Australia continue to work on the overall master planning for their assets, seeking to improve their tenancy mix to satisfy new consumer demands,” Bate adds.

A pipeline of significant projects is underway in all capitals. “Sydney alone is expecting approximately 100,000 sqm of additional retail space over the next five years,” Bate explains. These include projects in Barangaroo Metro, Martin Place and Circular Quay. Melbourne also has new retail sites coming to The Walk Project, Melbourne University, Queen Victoria Markets and St Collins Lane.

“As vaccination rates reach key milestones, restrictions lift and borders eventually open these centres have every chance of thriving again,” Bate concludes.

Download The future of retail demand: The road to recovery.

Tags: retail