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News release

Strongest retail trade sectors remain food, including take-away food, coffee shops and speciality food retailers

Supermarkets and food retailers continue to be the best performed and most active retailers looking to expand their operations, says Jones Lang LaSalle Survey


AUSTRALIA, 2 APRIL 2012 –  In a trend that has been apparent since the GFC, food retailing remains the strongest retail trade sector, according to a new Jones Lang LaSalle survey of Retail Centre Managers across Australia.
 
The survey was undertaken in February, across the national retail portfolio managed by Jones Lang LaSalle.  A total of 89 retail shopping centres were included in the survey across the five mainland states and the ACT.  The majority of centres were Neighbourhood Centres (51), Sub-Regional Centres (19) or CBD Centres (13).
 
The survey provides results of the retail market as at December 2011, together with the views of Centre Managers on the 12 months ahead.  Centre Managers reported that market conditions remain challenging and there are concerns that improved economic conditions may still be 12 months away.
 
Australian Head of Property Management, Richard Fennell said Centre turnover across the national retail portfolio managed by Jones Lang LaSalle had been reasonably buoyant despite the challenging market conditions, with solid growth particularly across the neighbourhood centre portfolio.
 
“Neighbourhood centre turnover increased by 4.3% in the 12 months to December 2011 while Sub-Regional centre growth was 2.8%.  This compares to total retail trade across Australia growing by 2.4% in 2011, which suggests both the Sub-Regional and Neighbourhood Centre portfolios marginally outperformed the total market.
 
“The growth in Neighbourhood Centres mirrored the growth in food retailing nationally, which also grew by 4.3% in 2011, according to Australian Bureau of Statistics figures. 
 
Neighbourhood Centres tend to be less impacted by challenging market conditions, with the less discretionary food and supermarket retail categories showing stronger growth that the total retail market,” said Mr Fennell.
 
“The Survey found it has been the CBD retail centres which have struggled the most over the last 12 months, as these centres tend to have greater reliance on discretionary spending, in particular fashion and a range of services.   Retail turnover growth in CBD Centres was a low 1.6% in the year to December 2011.”
 
Table 1: Retail Turnover Growth by Centre Type
 
Centre Type
Turnover Growth – Year to Dec-11
CBD Centres
1.6%
Sub Regional Centre 
2.8%
Neighbourhood Centre
4.3%
 
Retail Vacancy & Tenant Enquiry:

Mr Fennell said, “While the retail market has been challenging over the past 12 months, Sub-Regional Centres have maintained high occupancy levels. The vacancy rate across these centres was a low 1.1% in the December quarter, up marginally on the 0.9% recorded in the September quarter. 
 
The vacancy rate across the neighbourhood centre portfolio improved from 5.4% in September 2011 to 4.2% in December.
 
“On balance, Centre Managers who took part in the survey reported a slight downturn in tenant enquiry, with more respondents indicating weaker levels of enquiry in the December quarter compared to the September quarter.  24% of respondents reported weaker levels of enquiry compared with just 11% who said enquiry levels had improved in the December quarter.  However, 65% of Centre Managers reported tenant enquiry was about the same quarter on quarter,” said Mr Fennell.
 
Tenant enquiry was found to be dominated by ‘mum and dad’ retailers rather than national tenants and in terms of where the tenant enquiry is coming from, the strongest sector was food, including take-away food, coffee shops and speciality food retailers.
 
“Supermarkets and food retailers continued to be the best performed and most active retailers looking to expand their operations,” said Mr Fennell.
 
Sales growth & Sentiment:
 
The Survey found that while competition from other centres and online retailing featured highly in the list of concerns for some Centre Managers, the economic outlook over the next 12 months was clearly the greatest concern impacting on retail turnover.
Mr Fennell said, “The main concern for Centre Managers and retailers is still the economic outlook.  The retail outlook for 2012 is for below trend growth in retail trade with stronger growth not forecast until 2013.
“Centre managers were also focussed on reviewing and improving tenancy mix in order to drive sales turnover growth. 
“Refurbishments are also considered necessary in order to keep the retail offer modern and relevant, but new investment is being constrained by the current subdued economic environment,” said Mr Fennell.
Director, Research and Consulting, Australia, David Snoswell said, “2011 was a tough year for retailers and the retail sector in general. Sentiment amongst Centre Managers declined in late 2011 / early 2012 with 60% of respondents reporting that the economic outlook would have a negative impact on trading prospects during the next 12 months.
“Consumers have remained cautious in their retail spending, with discretionary spending in particular taking a hit. 
“While the economy has expanded, the rate of growth has been well below long-term averages.  In addition, retail spending in shopping centres has come under pressure from both on-line retailing sources and above average growth in other consumer spending areas such as utilities, rates, health care and education,” said Mr Snoswell.
Jones Lang LaSalle’s Retail Centre Managers’ Survey is planned to be conducted each quarter.