The average vacancy rate across shopping malls around the country has risen to its highest level in eight years amid softening conditions, store closures and the long shadow of online shopping.
Nationally, the shopping centre average vacancy rate – excluding CBD retail – rose from 2.6 per cent in December 2016 to 3.3 per cent in June 2017, according to JLL figures, which cover more than 22,000 stores around the country.
The CBD vacancy rate decreased slightly – from 6.8 per cent to 6.3 per cent – but still remains much higher than for suburban malls.
Vacancy rates in regional shopping centres increased slightly in the 2017 first half amid a larger amount of redevelopment.
Store closures loomed large as a factor in rising vacancies. A wave of high-profile brands went into administration this year, including Herringbone, Rhodes & Beckett, Marcs, David Lawrence and Topshop Australia.
On JLL figures, 763 stores have gone into voluntary administration in the 18 months to June 2017.
“There is a cyclical component to the current conditions,” said JLL’s retail research director Andrew Quillfeldt.
“Some of the economic factors weighing on retail spending growth at present will eventually fade.
“The housing market is less of a driver than it was in previous years, wages growth remains subdued and new market entrants are driving competition-led discounting among retailers has kept inflation low or negative.
“We expect rental growth to remain muted in the short-term but the fundamental drivers of strong population growth for a mature economy and employment growth will be supportive over the medium term.”
Major shopping centre landlords, including Vicinity Centres, Scentre Group, Mirvac and GPT, are busy working through their real estate, refreshing their portfolios to win shoppers back from the ease of online consumption.
The imminent arrival of Amazon in Australia in particular has sharpened fears over the potential disruption to retailers and their landlords from online shopping.
BIS Oxford Economics has forecast shopping centre net income growth will barely keep pace with inflation over the next five years. Major fortress-style malls, such as Vicinity’s Chadstone shopping centre in Melbourne, showed the lowest vacancy rates, while CBD retail was the only category to record a decline in the vacancy rate.
That fall was driven by strong CBD leasing results, including in Sydney where vacancy rates fell from 3.9 per cent to 3.3 per cent in June 2017.
That decrease was also partly the result of withdrawals for development in central Sydney.
Retail landlords are now very focused on the long-term challenges for the sector, especially technology, said Tony Doherty, JLL’s Australian head of retail, property and asset management.
“A re-development upswing is underway as owners reconfigure and refurbish shopping centres to install technological infrastructure for customer analytics,” he said.
Much of that effort will turn to the use of big data, with players such as GPT already well-advanced in harnessing analytics to understand and ultimately influence shoppers.