Shopping centre managers are less optimistic that retail sales will increase over the next year due to increased competition in the Australian retail sector, according to a report released by JLL.
JLL’s 15th Retail Centre Manager’s Survey indicates only 52 per cent of managers in 116 centres overseen by JLL expected retail sales to increase over the next year, a three per cent drop compared to the company’s previous survey in February.
“The fact that competition remains the number one concern of centre managers demonstrates that the retail mix is ever important,” said Richard Fennell, JLL’s head of property and asset management.
“The competition for customers amongst retail centres is very strong. That’s why shopping centre repositioning remains an ongoing strategy for many centres,” Fennell said. He said it is important to look at the demographics of consumers, who are they, what are they buying, and how to reach them.
Fennell said centre managers reported the most positive factors they saw that would impact on future turnover were in relation to the expected changes in tenancy profile, planned refurbishment activity to provide for new anchor tenants or a remix of speciality tenants and growth expectations within the centre’s trade area.
“A quality fresh food offering together with cafes that give customers a reason to linger for longer are seen as vital ingredients by many centre managers surveyed,” he added.
According to the JLL Survey, there appears to be no end to the increased level of competition in the Australian retail market. From Aldi’s national rollout to major fast fashion chains committing to large regional centres is very strong. Strong competition in the supermarket sector is also continuing.
David Snoswell, JLL’s director, Strategic Consulting, said despite centre managers being less positive about future trading prospects, there was still 52 per cent of respondents expecting positive turnover growth for the year ahead, and only 16 per cent of respondents expected a decline.
Snoswell added the mixed economic indicators remain a concern for retail trading over the next 12 months.
“Economic growth in the first quarter of 2016 was the strongest since early 2012 and the recently released June National Accounts were positive, although both results were highly dependent on exports and this doesn’t necessarily flow through to consumers. Domestic demand remains sluggish and it is domestic consumption that drives retail spending.”
Vacancy rates remained stable in neighbourhood centres at 3.7 per cent in June 2016, based on the survey respondents across the JLL-managed portfolio. This is well below the average vacancy rate of the last five years of 4.7 per cent. Vacancy levels increased in sub-regional centres from 2.8 per cent in December 2015 to 3.5 per cent in June 2016.
The survey was undertaken by JLL in August.
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