Where there's change, there's opportunity. The local shopping strip fights back as mixed-use developments make their mark and consumers embrace local shopping.

The last 12 months have been tough for many retailers in Australia, as brands including Willow,  Marcs, David Lawrence, Pumpkin Patch, Payless Shoes, Herringbone and TopShop Australia can attest. In addition to the high profile turmoil, the spectre of Amazon's local launch is causing further disruption. Despite the issues and disruption, changes to consumer behaviour - in part driven by real estate developments - are providing opportunities.

Whether Amazon's entry is the end of the world as we know it  or just a blip , there are plenty of other market issues impacting on retail in Australia: recent retail sales data in March 2017 showed a 0.1 per cent fall, (seasonally adjusted) when economists were tipping a rise.

Commenting on the March decline, Citi Group economist Josh Williamson claimed the retail sector - in 2015-16 an employer of 1.3 million and generator of sales and service revenue for the same period of $408,833 million  - was on the verge of a recession. Improvements to the seasonally adjusted figures did come in April (1 per cent)  and May (0.6 per cent) , but they've dropped back in June 2017 to 0.3 per cent . A previous article by CoreLogic's Commercial Research Analyst Eliza Owen looked at online versus bricks and mortar stores, and how the transactions made in retail have changed. While national and state data provides a high level setting for the economic state of retail, as noted, location still plays a significant role in the viability of a bricks and mortar retail business and the consequent potential real estate yield.

Cushman & Wakefield claim in their report, Australian Retail Property Outlook 2017: Cyclical and structural changes reshaping the retail landscape , that consumers are turning to buying daily essentials within "easy walking distance of major transport hubs and high density residential areas". The drivers they claim are "rising urban density, declining vehicle use, online retailing and the increasing popularity of prepared or semi prepared meals."

The new direction in local is supported by the preference of many Australians to both support local retailers, as well as buy local goods . According to the 2015 Westpac Australia Day Report:

  • 9 in 10 Australians (92 per cent) feel loyal to at least one small business in their community
  • Australians spend an average of $237 per month on locally made products.
  • 68 per cent of Australians wish there was more opportunity to buy locally made products and produce in their area
  • Australians show their support for small business by:
    • Recommending to family/friends/colleagues (51 per cent)
    • Going out of their way to shop there (50 per cent)
    • Paying a little bit more for products/ services (43 per cent)
    • 1 in 5 (19 per cent) Gen Ys show their support for local businesses by promoting them through social media

Small format low-rise stores in the local shopping area are being joined by new retail developments as mixed use retail/residential developments are being launched in prime shopping strips. These mixed use developments provide a ready-made local market for retail premises, with cafes and restaurants, convenience stores and supermarkets setting up shops beneath medium- and high-density residential.

Talking to the Australian Property Institute, Knight Frank research analyst Jane Wong  stated that: 

"The growing residential population will continue to boost retail trade, particularly food retailing, with a number of residential and mixed-use developments earmarked along Melbourne’s prime retail strips."

She noted that as well as food, personal retailing and furniture and homeware retailing were leading the growth. Major retailers are also joining the move according to Cushman & Wakefield, pointing to David Jones opening small format stores in mixed use developments, , .

Mixed use developments also include industrial real estate being converted to lifestyle precincts with residential and retail spaces. The latter is popular particularly in Sydney metropolitan with the State Government's strategy for in-fill development, designed to help meet the state capital's demand for residential property. 

Potential lower rental costs in these new mixed-used developments and in existing local shopping strips are providing further competition to established capital city prime retail locations like Melbourne's Chapel Streetviii.

The importance of food, in particular restaurants and cafes, is reinforced by Owen's analysis of ABS data over the last 7 years that shows food's consistent growing contribution to bricks and mortar retail trade turnover. 

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A recent study into five retail streets in Perth by Brett Wilkins, property adviser at Ray White Commercial WA and Vanessa Radar, Ray White Commercial head of research, found that food retailing outperformed other trade markets .

All of this is great, you say, but how does it help me own the main street? Here's our insight:

  • Identify winning clients - if food does well on the main street, provide potential hospitality clients with statistics and information on the food credentials of a shopping area. 
  • Australians enjoy buying from stores that are within walking distance of transport hubs and their residences. Make yourself the local expert by identifying for clients population density and proximity - the available market for retail and hospitality businesses. Include in your statistics both residential numbers and the business population: after all, office and other workers are a massive source of day time custom!
  • New building developments can considerably change the potential of an area. Be the knowledge source on the changing local environment - after all, businesses are long term investments.
  • Just as trade from local office workers are important for retail businesses, the presence of retail businesses near office space makes them more attractive to potential clients. A nearby vibrant local retail area can help an organisation gain and retain staff. 
  • Local events can also bring in custom and make an area more attractive to business tenants. Be the source of information on council and other events in the area for your clients by providing important statistics such as number of visitors and overall spend generated by the event.
     

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