Food & Beverage driving retail sector

Food & Beverage driving retail sector

2 November 2018

Retail trade in Australia is showing signs of improvement after recording its strongest growth since July 2017, with food and beverage and entertainment offerings fuelling the resurgence, reports The Australian.

CBRE Australia’s latest Q3 Retail Marketview report and JLL’s biannual Retail Centre Managers’ Survey are both upbeat about recent retail sector performance.

CBRE found retail sales grew by 3.2 per cent year-on-year to August 2018, largely driven by the food retailing category (inclusive of supermarkets, liquor and specialised food), which recorded its highest growth since December 2014 at 4.2 per cent.

CBRE’s Head of Retail & Logistics Research, Kate Bailey, said the growth in trade correlated with major landlords actively repositioning their shopping centres to tap into customer demand for food and entertainment experiences.

“Shopping centre landlords are incorporating a higher proportion of dining and entertainment facilities in a bid to drive foot traffic to their centres and capitalise on the strong retail spend in this category,” Ms Bailey said.

“Many centres are forging distinctive retail identities. We have noticed a significant investment by regional centres into entertainment, leisure and experience while neighbourhood centres are placing a heavy focus on fresh food and convenience offerings.”

Ms Bailey said the most recent examples are Vicinity and Scentre Group’s $90 million upgrade of Roselands Mall in Sydney and the $21m upgrade of Westfield Woden, Canberra.

JLL’s biannual Retail Centre Managers’ Survey also found that food and beverage leasing inquiries outnumbered those from competing categories.

The latest survey of centre managers across 88 JLL-managed malls covers mostly neighbourhood and sub-regional centres and was undertaken in August, notes the AFR.

It found 52 per cent of centre managers reported that enquiry levels from the F&B sector remained the same or stronger than the previous survey, six months earlier.

Zelman Ainsworth, CBRE Retail Leasing Director said the rising presence of the F&B sector was evident considering the number of new leases taking place nationally.

“We are noticing a shift in retail tenancy mix in CBD precincts across Australia and it’s evident landlords are placing a more heightened focus on F&B offerings than they previously have,” Mr Ainsworth said.

“The demand for F&B services is surging – it’s common for the average millennial to eat out as much as four times a week – so there is room for more hospitality operators to join the market and/or occupy further retail space in the CBD precincts, particularly when other retail services are moving online.”

“Today, retailers are no longer competing on price – customers are more invested in human interaction and experiences, and that is ultimately the key to any retailer’s success,” Mr Ainsworth concluded.

On the investment front, overall transaction activity was down slightly in Q3 at $2.4 billion, compared to $2.6 billion in Q2, says CBRE.

Shopping centre transaction levels however remained buoyant during the quarter, accounting for $1.2 billion of deals.

Retail asset yields remained stable thanks to the strong quarter-on-quarter compression (25 basis points) recorded in Melbourne where prime and super prime yields sharpened to 3.6 per cent and 3.5 per cent respectively.