Chadstone readies for growth
With the completion of The Emporium in Melbourne’s CBD and a firming of the retail leasing market, the board of CFS Retail Property Trust has given the green light to a $580 million expansion of the Chadstone shopping centre.
Chadstone is already the largest shopping centre in Australia with a retail floorspace of 158,600sqm and annual sales of $1.4 billion.
The new extension, which has planning approvals, will add 40 new retailers and up to five flagship stores for international retailers.
On completion, Chadstone will have 554 retail tenants and retail floorspace of 178,200sqm.
The expansion will also include a 10 level, 17,000sqm office building.
Angus McNaughton, CEO of CFS Retail Property Trust, said the project will incorporate a revitalised west mall with an expanded luxury offer and a new north retail entertainment and leisure precinct that will include a state of the art Hoyts digital cinema complex.
He said the expansion is an “important next step in the evolution of Chadstone”, allowing the centre’s owners to modernise and complete the race track configuration of the shopping centre, while meeting strong retailer and consumer demand for new luxury and international flagship offers.
The Chadstone expansion has been on ice for several years while CFS worked on Emporium and waited for stronger leasing demand.
While CFS has not divulged current leasing figures, sources indicate that lease renewals are running at rental concessions of around five per cent lower, while new tenant signings are at around eight per cent lower than headline rents for former tenants.
CFS was forced to discount rents and add other sweeteners to leasing deals for Emporium, which had a soft opening at Easter ahead of a full scale launch in July or August.
It is understood that rents at Chadstone have not been dented as significantly as other centres and has commitments for around 11,000sqm of the new floorspace for flagship internationals.
The existing west mall will have an expanded luxury offer, while the new north retail precinct will accommodate a 1300 seat, 26 tenancy food gallery, as well as cinemas and new specialty retail.
An existing Target will be relocated to the lower ground floor in a new 7000sqm store.
Early works and demolition are due to begin next month, with construction starting in September and staged openings through to completion at the end of the 2017 financial year.
The project is targeting an initial yield on completion of greater than six per cent, with a target internal rate of return greater than 10 per cent.
Although a large number of retailers have yet to complete fitouts at Emporium, the centre has generated solid traffic flows and positive feedback from the retailers that are trading, including the Japanese retailer, Uniqlo.
Uniqlo claims its first four days of trade in Melbourne were the highest sales of any store worldwide, a result achieved by clever pre-opening marketing that included a pop up shop in the Melbourne CBD to promote the brand.
While a number of international and local retailers complained about the delayed opening, Uniqlo developed a promotional strategy to underpin its Easter launch.
Emporium was originally to open in November last year.
CFS said two thirds of the 220 tenants at Emporium are now trading. Retailers yet to open include Myer and Topshop.
In another announcement this month, CFS has advised has lifted its stake in the DFO South Wharf complex in Melbourne by 25 per cent and now has a 75 per cent stake in the completed discount retail centre.
The company outlaid $87.6 million to the Plenary Group, which scaled back its investment in from 50 per cent to 25 per cent.
Michael Gorman, deputy CEO of CFS, said DFO South Wharf has continued to report strong sales growth since its acquisition from receivers of the Austexx DFO group in 2010.
Moving annual sales growth for the centre to March 2014 was 22.9 per cent with specialty store growth of 22.6 per cent.
DFO South Wharf is a two level retail outlet centre at the edge of Melbourne’s Docklands precinct and has 18 mini major retail tenants, 140 specialty stores, and a homemaker hub with 30 large format stores.
This story first appeared in Inside Retail PREMIUM, issue 1999.