Why there is trouble in retail: report
A new report on the state of shopping centres across Australia reveals a stark gap between centre growth and rising rental costs.
The Spectrum Analysis study, ‘Shopping Centres – still an Inconvenient Truth (revisited in 2019)’, shows a deterioration in dollar performance against inflation, while rents are expected to increase at much higher rates.
Spectrum Analysis CEO Peter Buckingham explained “In 2017 we undertook a study of shopping centres called Shopping Centres – an Inconvenient Truth, and showed that although rents were increasing at around CPI plus 2-3 per cent which equated to around 4-5 per cent, shopping centres were not growing at the same pace.”
Shopping centres report
Data from the Property Council of Australia (which forms the base of the Spectrum Analysis review) reveals the growth over the last two years across the biggest shopping centres – 14 super regional shopping centres.
These centres have seen the following increases:
- Gross Lettable Area Retail (size in m2 ) by 3.57% pa.
- MAT (dollar turnover) by 3.86%.
- Pedestrian traffic by 2.85%
- MAT/GLAR by only 0.26% pa.
Neighbourhood centres emerge quite well in the comparisons but this is due to the anchor tenants, supermarkets, benefiting from long term rentals and favourable rent increases, suggests the report.
Buckingham is critical of the rental hikes across the retail landscape.
“How do shopping centre owners still press for annual increases in rents of 4 per cent or 5 per cent when the increase in the dollar per square metre sold through the centres has been increasing (and often decreasing) in the range of -0.63 per cent to 0.25 per cent for super, major and regional shopping centres over the last two years?” he said.
“The growth of our shopping centres across Australia makes it very hard for shopping centre owners to justify large rental increases well above CPI, when the shopping centres are performing poorly measured by the industry standards,” Buckingham said.
“And we wonder why there is trouble in retail.”