From the source: Mark Kirkland, AMP Capital

AMP capital's mark kirklandBIO: Mark Kirkland, managing director

Kirkland oversees a team of more than 300 people responsible for the centre management, asset, property and development management, leasing and marketing across the Australian and New Zealand portfolio. Mark brings 26 years of major project experience in the property sector, with 23 years focused on retail.

COMPANY PROFILE: AMP CAPITAL
A leading investment house with $165.4 billion in funds under management, AMP Capital has a strength in real estate and infrastructure and oversees almost 30 shopping centres.

IRW: What are some of the exciting developments coming up for AMP Capital?

MK: It’s our biggest year potentially in terms of project starts. We’ve got Garden City and Karinnyup in Perth, both $700-$750 million developments. We started early works on Garden City in the last month or two.

Both work on the same principles we’ve delivered at Pacific Fair (on the Gold Coast) and Macquarie Centre (in Sydney) – bringing the best of international brands, food, dining, entertainment.

‘Place making’ is key for us. The rationale for the ‘place’ strategy is creating really authentic, great experiences that resonate with local markets that the assets sit in. All the research we’re doing is about experience, experience, experience, so how do we make the spaces in between retail great places to be and great experiences to enjoy to make our customers more loyal to our centre, keep them sticky and make them become advocates for our product? It’s about somewhere, not just anywhere.

We put a lot of effort into that from a research perspective at the front end, as well as the economics of the trade area these days, so we really get into the psyche and hearts and minds of our customers and what they really want.

At Garden City, people want to having bragging rights over the east coast, so they travel a lot to shop, they go into Asia, they know what’s available in Sydney and Melbourne – so they want all of that, plus more.

In a way, that’s uniquely Western Australian and the common themes we hear about are all around light, greenery and water. At Garden City, it’s about bringing the garden indoors, so there’s a big focus on greenery and water both indoors and outdoors and natural light.

But none of that works unless you have a great retail product. That’s what brings people into the door, so if it’s not convenient, if you don’t have the right offer that matches the demographic, then it doesn’t matter how great the place is. It all needs to come together as a package and as a total experience.

Karrinyup has been one of the two dominant centres in Perth for a long time in terms of performance and straddles the north and south of the river and we’re all about maintaining that dominant position.

Again, it’s expanding the best of the fashion offer, it’s bringing in more fresh food. We’re underdone in that centre for fresh food, so we’re bringing in two new supermarkets, and we’re significantly expanding our leisure, dining and entertaining all wrapped around some great outdoor spaces, greenery, natural light.

IRW: Karrinyup will have a lot of community spaces like piazzas. What was the thinking behind that?

MK: Karrinyup is a bit more ‘coastal cool’ than Garden City – it’s a bit more sophisticated in terms of the market. We’ve got a big outdoor space, not dissimilar to Garden City. It has a big dining precinct and we’re creating great external spaces with water, landscaping, natural light, lots of outdoor dining options. Again, a lot of them comes from the research – we want more dining because there’s nowhere else for people to do that, but it needs to be wrapped into a great precinct that has a coastal feel, and really give people an opportunity for that social experience because there’s not really anywhere to go for that.

IRW: The new Pacific Fair development has been described as a multi-sensory experience. Can you tell me about that?

MK: We’re trying to position it as a global five-star leisure entertainment and tourism asset but maintaining the elements of Pacific Fair has always been well known for – being quintessentially Gold Coast and part of the whole Gold Coast family holiday and also meeting the needs of local residents. We put a lot of focus around some of the original ingredients of the centre – the indoor and outdoor piece with natural light, greenery and water.

We don’t just look at the daytime experience, we also look at the nighttime experience, particularly sitting in the heart of that tourism market. A lot of our international tourists have been saying, ‘We can shop 24/7 home and we want to shop longer hours’, so a lot of our efforts has gone into lighting and nightclub experiences.

It’s a really diverse market there, because we’ve got local residents which vary – there’s a wealthy strip along the coast and along the hinterland and then there are others with a lower household income.

Then you’ve got daytripper tourism, interstate tourism, international tourism and within international, you’ve got all the countries that make that up – it’s really about trying to understand what that experience needs to be to resonate with all of those markets. It’s not going to be all things to all people all the time, but there will be pockets of things that will resonate. So we’re trying to build a sensory trail through there, whether it’s the water, the luxe precinct, the dining area or the fresh food precinct.

We’re trying to understand what the key physical and experiential attributes are for the customers who will use the precinct, whether it’s our landscaping, seating, lighting, customer service experience or how we do the guidelines for the tenant fitouts – we’re taking a holistic overall approach.

IRW: Now that a lot of international brands have expanded to Australia, I think shopping centres often run the risk of offering the same experience to customers wherever they are. What are your thoughts on that?

MK: Whether it’s the same or different, I think the issue is about being relevant to your local market. If you’ve got two markets that are the same, those centres may be the same, but that’s by design, not default. I think it does still go back to what your local market is, who your customer is and what brings them through the doors every day of the week – that’s the product, the convenience, the parking, but it’s also great places and experiences in around all of that.

IRW: How much of a real threat do you think online retail is to shopping centres?

MK: There’s a lot of noise about it. We recently had a presentation from [retail analyst] Peter James Ryan who basically said that there’s a lot of noise out there, but US government data has found that online makes up less than 10 per cent of purchases.

Four or five years ago, we did research into the future of retail, looking at international brands coming to the market, what’s going to happen in online retail and we started to position our portfolio around that. The penetration of online to date has been slower than predicted and the number of those international stores on the ground has been lower than predicted, too. It’s a continuation of a trend we’ve been having for awhile. Amazon coming here may speed it up a bit more than before, but we don’t see the overall market share of online increasing outside of what those original pieces of research were saying.

AmazonEqually, a lot of retailers say they aren’t worried about Amazon, but I think that’s naive as well. If you look at shopping centres over a long period of time, there’s been a trend where the discretionary spend as a portion of household income has been coming down for a long time, because things like health, utilities and education has been taking a larger share of the household pie. Within that discretionary retail spend, things like food, beverage and services has been increasing over a long period of time. This is not a sudden thing that’s happened overnight, it’s a longer-term trend.

We’re all actively managing our retail mix, moving away from areas that are most at threat from online – there’s a decrease in music stores and bookstores, but you’re seeing a growth in massage, acupuncture, botox clinics, health and wellness, food and beverage, leisure and entertainment. It’s just part of what we’ve always done as proactive asset managers – you have to understand your market, what’s shaping the industry, your trade area and be really disciplined about how you manage the assets.

Even within that, there are retailers that have been more responsive and adaptive and getting it and they’re killing it in the market. In the Gen Z research we found, they’re still wanting to shop in centres, but using digital and online to help inform them in making those shopping decisions. Even within those sectors that are under threat, we’re still seeing out of that research that if you’re giving people an experience and you stand for something, there’s still a place in the market for you.

We as landlords have to be selective – not just about the retail categories that are going to be impacted, but which retailers in those categories are doing it really well and making sure we’re working with those guys. And for those who aren’t, where can we support them?

IRW: There’s been a lot of talk recently around how food is the new fashion. Is that what you’ve found, too?

MK: There’s an overall trend where more meals are eaten out of home now, whether it’s a grab ‘n’ go or a sitdown meal – that’s opened up a market for multiple levels of dining in centres.

At Pacific Fair, we have traditional food courts, but within that, people are looking for more healthy opinions like salads and sushi, there’s the quick grab ‘n’ go, which is typically found outside of supermarkets, then we see the sit-down quick service restaurant-type offer, like Nando’s and Schnitz. Then there’s the more full-on sit down restaurant type meals.

There are definitely a lot of little subsectors in that, but it’s about going back to the market.  Up there, we have an overlay of the strong tourism market that’s got a different demographic to deal with in terms of how much food they have in different sectors, as opposed to Macquarie Centre in Sydney, which has a lot of university traffic.

It goes back to matching your market and understanding your customer. Australian shopping centres have a much lower percentage off food and beverage compared to Asia, the US and Europe, so there’s plenty of growth in that category over time as well.

IRW: What would you say are some of the greatest challenges for shopping centres right now?

MK: I think at the moment, sales growth is lower. We have seen international retailers come into the fashion categories, which has put downwards pressure on pricing with some of our domestic retailers. Some are doing it tough and you can’t be ignorant about that as landlords. We need to keep working with all our tenants to make sure we’ve got sustainable and growing businesses going forward.

There’s a lot of, the rate of change in the industry – it’s always been an industry where change is churning, but it feels faster now and there’s a lot more information now. Consumers are more savvy because of what they can get get online, even if they’re still coming to centres to shop.

There’s a lot of different factors out there, but I think it still goes back to the basics at the end of the day – it’s all about location, location, location. If you’re well-located in your trade area, you understand what your customer is looking for, your product resonates with them, you’re creating great experiences and events and giving them that opportunity for social connection, there’s still a place for centres long into the future.

IRW: AMP ran some research on Gen Z recently. What were your findings like and what should retailers know about Gen Z?

MK: They’re 18-22 years old, working and earning an income. They like to shop in-store more, but they want technology to help inform that in-store shopping experience for them, so it’s really important that retailers have got an omnichannel approach, so people can go online, research the product, then work out what they want to do when they get to the centre.

You can’t just be a commodity for customers – how are you going to differentiate yourself from your competitors? You have to give them an experience they can’t get online – they do value that touch and feel, the in-store interaction with sales assistants to help them with their purchase. Gen Z still very much sees that shopping trip as a social trip, because they don’t want to make those decisions on their own – they want to go shopping with their friends, particularly the males. They’re more influenced by their friends than traditional advertising. I

They would also choose a brand that meant something or is ethically compliant and they’re happy to pay a little more for it. They’re not as price-sensitive as Gen Y. You can see brands doing that. Lush is a good example of that, as well as H&M where you can recycle your clothes.I think that trend will continue.

 

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