New retailers set sights on Australia
More international retailers are eyeing off the viability of entering Australia, depending upon their ability to secure flagship sites in capital cities or in expanding suburban malls, according to Colliers International research.
Michael Bate, national director and head of retail for Colliers International, said he believes the increasing level of shopping centre floor space will be met with demand from international retailers such as H&M, Uniqlo and Zara, as these operators pursue market share and maturity in the Australian market.
But he said more international players will look to expand into Australia.
"The success of these brands to date has led to an evolution of their strategies, as they are now bringing sub-brands such as COS and J.Crew to the Australian market. Relative to Australian mini majors and other successful retail concepts, these international retailers are still under-represented in the Australian market place," Mr Bate said.
"In addition to these players, we expect that landlords will begin to receive more inquiry from a variety of South African retailers who are looking to expand operations beyond their home shores."
Mr Bate said organisations such as Shoprite, Pick n Pay, Massmart, which is a high-volume, low-margin, low-cost distribution of mainly branded consumer goods, Steinhoff, The Foschini Group and Edcon have all demonstrated a high degree of success within select African retail markets, benefiting from the swelling middle class consumer market.
"Looking forward, growth within the African nation will face headwinds of economic instability, labour disputes, currency exchange challenges and a lack of distribution infrastructure," Mr Bate said.
"It is logical therefore, that many of these groups together with their underlying brands will look offshore to facilitate revenue growth, and Australia will likely become an appealing option."
He said that in addition to offshore tenant demand, domestic consumption will be supported by robust population growth, which according to the Australian Bureau of Statistics, is running at an annual rate of 1.3 per cent, and expected to reach almost 30 million by 2029, and almost 40 million by 2056.
This comes as the country's listed landlords are reporting solid growth in speciality store sales, while discount department stores continue to face headwinds and the supermarket wars are unabated as Aldi branches further into fresh food and attempts to capture more basket share nationwide.
Daniel Lees, director of research for Colliers International, said as at the third quarter of 2016, the average spread between Australian regional retail asset yields and risk-free rates was 3.69 per cent, or two standard deviations from long-term historical averages, and far higher than what they averaged over the past 20 years.
"Our outlook for further rental growth is supported by institutional commentary during the most recent reporting for the 2016 financial year,, where landlords including Charter Hall Retail REIT, Mirvac, Shopping Centres Australia, GPT Group and Vicinity Centres noticed positive releasing spreads in a range of 0.5 per cent to 7.5 per cent," Mr Lees said.