Go west: Retail goes beyond the CBD

Sydney cbdThe concrete jungle has always been a no-brainer for food and beverage retailers looking to establish their concepts in high footfall environments, with an abundance of cash flush consumers – but Sydney’s CBD isn’t what it used to be.

For Charlie El Hachem, a Sydney-based entrepreneur expanding café brand Piccolo Me, Australia’s largest city has become synonymous with higher rents, stiff competition and, more recently, disruptive construction work.

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“What we’re trying to be is a really strong brand in the city, but a lot of buildings are getting refurbished, food courts are being built and competition is coming in,” he told IRW. “There’s a lot of uncertainty, especially with the metro [light rail] construction.”

According to leasing agents, El Hachem is one of a growing number of retailers, particularly in the food and beverage space, that are looking elsewhere for growth in areas once considered too underdeveloped for trendy brands.

Piccolo Me, which has opened eight CBD locations since launching in 2015, is now moving west, following the expansion of Western Sydney University (WSU) with a recent opening at its Parramatta south campus and one planned inside the university’s new location in Parramatta’s new CBD.

James Beerworth, a senior manager in CBRE’s retail services team, believes that El Hachem’s experience is representative of a broader groundswell in retail opportunity out west, driven by population growth and shifting demographics, particularly in the heart of Parramatta which is undergoing significant redevelopment.

“We’re seeing a generation shift in food and beverage…there’s a lot more appetite now from brands,” he said. “I’m fielding inquiries once or twice a week from major food and beverage brands asking if we’ve got anything in key western retail hubs.”

Aside from WSU’s new 14-storey vertical campus, $2 billion has been invested in a new Parramatta Square precinct by the Walker Corporation, which will bring an additional 5,500sqm of retail space to Parramatta’s CBD on completion.

Cheaper rent, growing spend

Hachem, who has also opened a store near Penrith, said he was hesitant at first, but that he and his business partner/brother Roy El Hachem took a risk that’s paid off, with rents from the new stores an estimated 30 – 40 per cent cheaper depending on the location and spending much higher than anticipated.

Where retail space can go for as much as $5,500 per square metre on George Street in the heart of Sydney, Beerworth said retail strip rent in Parramatta or Penrith goes for $500-$850 per square metre.

“We’ve actually found that spend is a bit better out west,” El Hachem explained, also noting that his franchise partners have found it easier to secure employees at the new locations.

Data released last week by development consultancy URBIS and commissioned by the Walker Corporation claimed that retail spend among Western Sydney residents will increase by an estimated $12 billion by 2026.

The findings are underpinned by Australian Bureau of Statistics population data, which shows that the number of residents in the Parramatta area increased by 10.4 per cent from 2012-15, with the population in Blacktown and Penrith increasing by 8.6 per cent and 5.2 per cent respectively over the same period.

URBIS projections claim that Parramatta will have more residents than most of Australia’s other CBDs in less than a decade, second only to Melbourne. As much as 40 per cent spend is predicted to be on food retail and catering.

Expansion looms

David Wilcox, URBIS’ associate director, believes that international brands looking to open more stores and national niche retailers who haven’t been west yet will be key beneficiaries, predicting that the equivalent of 15 Westfield shopping centres would be needed to cover the projected boom.

“The amount of additional spend can support more floor space or drive up the productivity of existing centres,” Wilcox said. “You’ll see a balance. All roads lead to more retailers, whether that’s the expansion of existing centres or the development of new ones.”

Currently, Westfield Parramatta serves as the area’s key retail hub, with brands like Zara, Uniqlo, Guzman y Gomez and Gelato Messina operating stores in the centre.

Gelato Messina is also currently preparing to open a Penrith store in July and, according to co-founder Declan Lee, will continue to look west for growth opportunities.

“We get a lot of requests to open out [west],” he told IRW. “We’ve probably done enough in inner Sydney, we don’t really want to open more stores – we’re a bit saturated.”

Referencing data from a recent Western Sydney town hall he attended, Lee added that “from a population point of view, Parramatta is going to be the centre of Sydney and Penrith will be the western side of that”.

However, Lee doesn’t believe rents are that much cheaper in Western Sydney, particularly in Westfield. For Gelato Messina, expanding outside of the inner city is a challenge that has required the presence of a local partner with in-depth knowledge of the market.

Government onboard

As retailers assess their options, investment commitments outlined in the 2017-18 Federal Budget are set to further catalyse Western Sydney’s growth, particularly the long-awaited Western Sydney Airport, which both Wilcox and Beerworth say will be a boon to retailers.

The Commonwealth plans to inject $5.3 billion into the development the Badgerys Creek airport, as well as further investment in an incentive program that will be pitched to state and local governments to encourage them to support planning and zoning reform in the west, which is intended to accelerate housing supply.

Although Western Sydney Airport will be available at all hours, Savills’ national director of retail investments, Steven Lerche, does not think tourists will stick around.

“It’s hard to believe that tourists going into Badgerys Creek are going to be staying there – they’re really coming for the harbour and everything else,” he said.

“If you’re in London, you don’t stay out at Heathrow, you go straight into town…I can’t see tourist income and expenditure being spent in Western Sydney shopping centres.”

Lerche said the key benefit of the airport development will be employment opportunities in the surrounding area and big international brands will continue to look to Sydney’s CBD for flagship opportunities.

Wilcox agreed with the notion that big brands will want representation in closer proximity to the harbour, but noted that most global cities have two major retail hubs.

“I don’t think you’ll see Parramatta picked over the CBD,” he said. “Sydney’s CBD will always be the go-to place, but I don’t see any reason why you can’t have equally large and impressive outlets in Parramatta.”

For the Hachem brothers, the journey will continue. The pair see a future for their growing company out west and intend to invest heavily before many of the major brands expand too extensively.

 

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