ming in Australia and weighing up what opportunities might be available to them. There are many factors that have made Australia an attractive proposition for international retailers and the motivation to make the move is related to the global financial crisis and the subsequent dawdle of the global economy. Prior to the global financial crisis, expansion in North America, America and Asia was more enticing than Australia, which was regarded by many international retailers as too small and a comparatively costlier growth option in terms of rents, wages and supply chain logistics. For many retailers, especially apparel brands, there was also the reverse season problem that made inventory planning more complex and a somewhat chequered history of some of the early adventurers in the market, such as the Japanese department store, Daimaru and the twice-failed British chain, Mothercare. Global retailers have reassessed the Australian market in recent years based on better economic growth compared to most other countries, high consumer wages and potential spending power, a stable political and regulatory market and consumer enthusiasm for their brands. Improved supply chain economics, low worldwide interest rates that provide cheap capital for expansion and technology, including the internet that allows global retailers to reach customers across Australia from a compact store network have all made expansion into this market more appetising. Australia’s virtues as a potential growth market for the global retailers also compare favourably with markets that promised massive growth but have proved problematic, including China and India. A tight grip While economic factors have driven much of the interest of global retailers in Australia, there have been two other key factors: the strength of the shopping centre industry and the dominance of Woolworths and Wesfarmers. The relatively tight ownership of shopping centres in Australia had been a bugbear for many homegrown retail chains because of the limited opportunities to negotiate rent deals, although it has facilitated growth, particularly for newer retail concepts. However, the tight ownership works to the advantage of international retailers, who are keen to develop a store network and achieve operational scale relatively quickly with exposure in prime dominant retail centres. Woolworths and Wesfarmers dominance was arguably a deterrent to entry to the Australian market in the past, but Aldi punctured their invincibility for all to see. More significantly, the Woolworths/Wesfarmers dominance has been central to a drive by shopping centre owners to recruit global retailers to Australia, especially for centre redevelopments. International brands provide increased competition and leverage to the landlord companies, as well as a new and more interesting offer for centres that have too long had a boring sameness about them. Shopping centre owners have been prepared to strike favourable deals with international retailers to the chagrin of the local chains but all retailers do arguably benefit from a more dynamic tenancy mix. It is interesting to note that Woolworths and Coles are the only Australian retailers listed in the top 250 global retailers report. Meanwhile, Woolworths’ ranking is slipping, as it pares back its business to its core food and liquor business and possibly, Big W. Big W may yet follow Dick Smith, Masters Home Improvement, Ezibuy and Woolworths fuel and convenience business out the exit door. Surprisingly, the development or ownership of shopping centres offshore by Australian companies, particularly Westfield, has not provided a platform for many local retail chains to venture into global markets beyond New Zealand. Woolworths had one joint venture in India in consumer electronics and missed an acquisition opportunity in Hong Kong, while Wesfarmers has only just tackled the British market with its acquisition and conversion to its Bunnings Warehouse format of the Homebase hardware chain. Few other Australian retailers have ventured into markets outside Australia and New Zealand and most of those that have done so have been franchise systems. Room to grow Australia has the highest retail floorspace per 100 people in the world after the United States and Canada. Australia’s ratio of gross leaseable floor area is around 94sqm per 100 persons, compared to 219sqm for the USA, 143sqm for Canada. This is followed by 54sqm for Singapore and 50sqm for New Zealand. Around 35 per cent of retail stores are located in shopping centres and generates sales of more than $9,000 per square metre. Total retail sales for shopping centres is estimated to be around $130 billion. There are around 1,800 shopping centres with more than 1,000sqm of retail floorspace, including about 70 department store based regional centres and approximately 300 sub regional centres anchored by discount department stores and supermarkets. There are also more than 1,100 neighbourhood or supermarket-based shopping centres, around 100 central business district shopping precincts and about factory outlet centres and themed centres, as well as more than 150 homemaker and large format retail centres. According to the Australian Shopping Centres Council, more than 19 million sqm of retail floorspace in shopping centres is occupied by over 65,000 speciality shops. The floorspace in shopping centres accounts for around 37 per cent of the total retail space in Australia and of the 19 million sqm, regional shopping centres contain around one quarter of the total shopping centre space, sub regional centres and neighbourhood centres each around one third of the space and CBD centres about four per cent. The prime focus of international retailers looking to enter the Australian market is on CBD flagship locations and around 30 to 35 shopping centres that dominate urban and a handful of regional catchments. Around 25 of those shopping centres have at least 1,000 square metres of retail floorspace and a number of them have further redevelopment plans, particularly in Victoria and Western Australia. An eye on expansion Among the retail centres looking to expand further is the Melbourne super regional Chadstone, which already generates sales of around $1.5 billion from its 190,000 sqm of floorspace. The showcase centre for most of the international retailers who have entered the Australian market, Chadstone is already planning to add a further 30,000 square metres of floorspace as it develops other complementary uses around its retail offer of more than 500 stores. Another Melbourne centre in the top five for retail floorspace and possibly joining Chadstone, Westfied Sydney, Westfield Bondi Junction and, potentially Westfield Fountain Gate topping the $1 billion mark in sales in this financial year is Highpoint Shopping Centre in Maribyrnong. Owned by GPT, Highpoint is currently the fifth largest shopping centre in Australia in terms of retail floorspace with 152,650 GLA but is currently planning further expansion that would lift its GLA to 185,000sqm. Highpoint dominates a north western trading catchment in Melbourne and the planned further expansion aims to provide floorspace for more of the international retailers entering the market. While not all the international retailers who have entered Australia have been successful, property firms report strong inquiry levels from European, South African and North American retailers as well as Japanese, Korean and Malaysian chains. There is also growing interest in the market from Indian and Chinese companies although their entry to Australia may be via acquisitions rather than greenfield ventures. The Australian Council of Shopping Centres claims that our industry has world best practice in design, construction and management of centres, including strategic tenancy mix planning. While the council argues there is a large number of owners of shopping centres across the country, including international equity investors, superannuation and pension funds and private investors, it is the major landlord companies such as Scentre Group (Westfield), AMP Capital, GPT Group, Vicinity Centres, QIC and Stockland that are the lure to global retailers. Those shopping centre owners are also the ones that are actively pursuing international retailers for centre upgrades, remixes of tenancy plans and the replacement of local retailers who are trimming their store networks. Access exclusive analysis, locked news and reports with Inside Retail Weekly. Subscribe today and get our premium print publication delivered to your door every week.