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News release

Australia

Positive Signs on the Horizon

JLL Retail Survey in August shows a slight increase in tenant enquiry since last survey in February


​​​​AUSTRALIA, 3 SEPTEMBER 2014 – The latest retail survey conducted nationally in August by JLL has found positive signs in tenant enquiry reported by shopping centre managers, with more Centre Managers indicating an increase in enquiry levels than a decrease.  

The JLL Retail Centre Managers’ Survey found rental growth expectations stabilised in the August survey, with 37% of respondents expecting some rental growth over the next 12 months – a similar result to the February survey of 38%.

Significantly, only 22% of respondents surveyed expected rents to fall over the next 12 months – the lowest level of negative responses since the first survey started in November 2011.

JLL’s Australian Head of Property and Asset Management, Richard Fennell said, “There are small positive signs emerging despite continued subdued retail performance.  However, it is probably more correct to say that Centre Managers are ‘less negative’ about the year ahead rather than ‘more positive’.  It was significant that we recorded the lowest level of negative responses about rental growth since the first survey three years ago.

“It was also significant that the August survey recorded one of the best results for tenant enquiry over the history of the 11 surveys conducted.  The measure for the net balance between stronger enquiry versus weaker enquiry was 2%, which is only the second time a positive result above the neutral 0% mark has been recorded.  The last time a positive result was recorded was back in December 2012.

“There was a noticeable variation between states with an improvement in tenant enquiry being reported in both NSW and QLD and a downturn reported in WA,” said Mr Fennell.

Figure 3 Tenant Enquiry Net Balance.jpg
JLL’s latest Retail Centre Managers’ Survey was undertaken in August 2014 across JLL’s managed portfolio.  A total of 99 retail centres participated across the five mainland states and the ACT.
Director, Strategic Consulting Australia, David Snoswell said, “We also found some interesting state variations regarding overall sentiment.

“New South Wales Centre Managers were more positive about the year ahead, fuelled by positive turnover results, a more buoyant consumer market and improved tenant enquiry.

“In contrast, Western Australia is feeling the impact of the mining investment slowdown, and this is showing up in recent turnover data as well as the sentiment from Centre Managers.

“There are signs of improving sentiment and changes in consumer behaviour that should support retail turnover in the months ahead, although the signs are somewhat mixed and not consistent across the country. Recent data suggests that the household savings rate, which has been very high in recent years, is trending down.  This suggests that consumers are spending more and saving less.

“JLL Research expects that there will be a lag between a rebound in retail turnover growth and a recovery in rental growth,” said Mr Snoswell.

Competition from other centres remains the number one concern of Centre Managers:

The August survey found the biggest concern Centre Managers have about future retail performance continues to be centred on competition from other centres.

Mr Fennell said, “The level of new supply in the pipeline is particularly strong for the larger regional centres across Australia’s metropolitan markets.  Between 2014 and 2016, over 440,000 square metres of additional retail floor area is forecast to come onto the market.”
 
Figure 7 Enclosed Centre Supply.jpg
“The sub-regional sector is under pressure from both poorly performing discount department stores and a sharp increase in regional centre supply over the next two to three years.  New international retailers coming into the market and moving into super-regional centres may place further pressure on this sector.

“However, Centre Managers continue to implement re-mixing strategies to lift performance.  There is a noticeable increase in planned refurbishments or redevelopments among the retail portfolio, which should support improved performance in the longer term,” said Mr Fennell.

Table 3 Impact on Turnover.jpg

The political environment and the economy have re-emerged as concerns for Centre Managers.  The August survey found those surveyed were much more negative with regard to the economic outlook and political environment compared with the survey six months ago.  Both factors recorded positive sentiment as at February but now Centre Managers expect the economic outlook and political environment will, on balance, have a negative impact on retail trade.

The Survey found food retailers (both food catering and specialty) remained the main source of enquiry by retailer type, with slightly higher levels of enquiry compared to the February survey.  Enquiry levels from clothing and footwear retailing has also picked up slightly. 

Fashion retailers underwent some consolidation in recent years and turnover has shown solid improvement over the last 12 months (national turnover growth of 10.7%).