Convenience, sustainability to drive future of retail leasing

By Nick Hall | 12 Sep 2019 View comments

Convenience, sustainability and customer experience are set to drive the future of retail leasing, according to the latest report from property firm CBRE.

Released on Wednesday, CBRE’s 30 Predictions for 2030: The Future of Retail in Australia report took a deep dive into the evolving retail leasing market, outlining a series of trends set to significantly impact the market.

The report’s release comes a poignant time, particularly for the franchising sector, with several industry bodies debating current retail leasing conditions.

Kate Bailey, CBRE head of retail research said the report’s findings outlined the sector is undergoing a period of tremendous change.

“Australia’s retail landscape has transformed significantly over the past decade and that rate of change will continue in the next ten years as retailers harness new technology and adapt to meet changing consumer demands,” she said.

“By 2030, consumers will prioritise environmentally sustainable products and retailers; the automation of appliances and growth of in-home assistants and technology will mean that buying many products will be a completely automated process; and time saving retail services will cater to specific customer needs.”

Customer experience

A key focus of the report was identifying how emerging trends were likely to impact retail leasing moving forward.

Bailey said a reliance on automation will see the buying process for a number of industries transition to fully-automated practices. As a result, when customers do venture in-store, Bailey said experience will be critical to a business owner’s success.

“Augmented reality will enhance the physical buying experience and retailers will engage with customers through unique instore experiences,” Bailey said.

“Stores will sell less but invest large sums in experiences. Customer loyalty will be key and big data analytics to track customer behaviours will also enable retailers to be more engaged with their customers through personalised services such as tailored sales and promotions and loyalty programs and rewards.”

Convenience

In terms of convenience, Bailey also suggested that a rising demand for efficient retail operations would prove to be a key driver in industries such as courier services.

“Courier services will be much more technologically advanced to allow delivery of all products at a specific time and place and virtual stores will allow the physical browsing experience but without the need to carry products after purchase,” she said.

Retail leasing conditions

As retailers and landlords battle to stay up to date with the latest demands, the sector is likely to evolve further.

Over the last 18 months, the power imbalance between landlords and operators has been widely documented, culminating in the introduction of a voluntary code of conduct in New South Wales.

Understanding the direction retail is headed, may help prospective small business owners to circumnavigate the retail leasing concerns.

Martin Matthews, CEO of Brand Collective, which operates Superdry, Volley, Hush Puppies and Clarks said that many of the issues come at the time of negotiation.

“For me, the major issue is that there’s still no incentive for a landlord to come to meet the market on renewal for a retailer that’s trading well,” he said.

“Some centres where demand has dropped of significantly are being forced to meet the market. And some centres are absolutely A-grade and in demand, and frankly they can justify their rent. But there are a few below that, where landlords see themselves as being in-demand, but they’re not. You can go to brand new shopping centres around Sydney and Melbourne and see hoarding up.”

With CBRE’s latest reporting indicating more automation is on the way, landlords may have to relinquish their high-rent rates in order to keep tenants.