Retail is Dead, Long Live Retail!

Retail is Dead, Long Live Retail!
August 28, 2018 admin

Latest retail results suggest that Queensland retail is dying. Rents are down across the CBD, regional and neighbourhood centres, vacancy rates are high and consumer spending has remained static. Changes in all industries are inevitable, but is retail set to enter a renaissance or an apocalypse?

Source: Colliers International Retail Research and Forecast Report – First Half 2018Australian Bureau of Statistics

ARE THERE ANY RETAIL DEVELOPMENT OPPORTUNITIES LEFT IN QUEENSLAND?

Like the residential market, there is no one-size-fits-all in the retail market.  Different geographic markets perform differently, as do segments within the sector.

Since the strategic retreat of Masters and the collapse of Toys ‘R’ Us, there has been a shift away from growth in discretionary sectors such as department stores, apparel and household goods. Instead, this growth is making its way into the food and beverage sector.

In Queensland, time-poor, financially-savvy consumers with a multicultural palate have driven rapid growth in hip, convenient food outlets across the state. This is reflected in the projects currently under construction by Niclin Group.  Over the past 12 months, we have worked on a range of food and beverage facilities, from Guzman Y Gomez and Liquorland, to Zaraffas and Pie Face. Learn more about our projects here.

WILL ONLINE KILL BRICKS AND MORTAR?

Much has been written about the battle between online and bricks and mortar by people far cleverer than us (check out this Deloittes article, if you are interested).

When it comes to the effect of e-commerce on retail property development, the opportunity has shifted.  The prospect we are seeing for Queensland developers is not necessarily playing out in the retail sector, but we are seeing its effects in the industrial arena.

The Colliers First Half 2018 Industrial Report suggests Queensland industrial supply is being outstripped by demand. This is indicated by lower investment volumes in comparison to the last three years, tighter yields with scope for further compression over the next six months, and significant increases in land values.

There was a record take up in 2017, with the entire 251,000sqm of industrial supply added to the market over the 12 months leased. This persistent demand, coupled with land price increases, is expected to place upward pressure on rental values for both existing buildings and the pre-lease market. It is also expected to raise the value of infill locations in the near future.

Over the past 12 months, Niclin Group has designed and constructed more than 10 separate industrial tenancies used for retail purposes in South East Queensland. This trend continues with our five retail-industrial tenancies currently in the pre-construction phase. Although the online shopping obsession is evolving in the retail sphere, the growth in retail-industrial tenancies shows that it’s not bad news for developers.

As online sales in Australia make up just 5.4% of all retail turnover, compared to the UK and US markets where online sales make up 17.4% and 9.5% respectively, we believe that e-commerce will continue to deliver opportunities to Queensland developers. As we can already see rapid growth in the retail-industrial market, it appears that Queensland developers are already experiencing these unique and beneficial opportunities, which will continue to grow and expand with the online shopping boom.

WHAT DOES THIS MEAN FOR RETAIL AS WE KNOW IT?

In summary, the beginning of the changes to the retail sector are already evident in the sharp uptick in the industrial market, a trend that looks set to continue or even intensify in the future. Although online shopping is already demonstrating a shift in the retail market, the subsequent positive changes we can see in the industrial sector shows that it’s an adaptable market for developers.

Retail is dead, long live retail!

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