Is Retail Construction Activity In Australia Really Rising? ? Asia ...

Retail development activity in Australia is currently dominated by the construction of bulky goods projects. There are two types of bulky goods centres ? multi unit centres and category killer centres. The difference between the two types is that bulky goods multi unit centres have a number of large bulky goods retailers (including furniture and electronic goods) and small specialty retailers, while a category killer is a stand alone big box store occupied by one bulky goods retailer.

Supply in the category killer sub sector has driven this pick-up and is almost exclusively due to the aggressive rollout of new Masters Home Improvement stores across Australia, a new brand being established, and the expansion of competitor Bunnings Warehouse. Both chains are part of the larger retailer organisation in the highly concentrated Australian retail sector. Together, these Bunnings and Masters stores accounted for 25% of total retail supply in 2011 and are expected to account for 52% of total retail projects in 2012. In comparison with the peak at 2008 before Masters Home Improvement had been established, Bunnings represented 7.1% of total retail supply.

Total retail supply cycle in Australia troughed in 2010, with 349,400 sqm of new retail projects completed, which is less than half the 783,800 sqm recorded at the peak in 2008. While total supply is rising, if the Bunnings Warehouse and Masters Home Improvement store projects are excluded, new retail supply additions are actually constrained. By the end of 2012, 623,900 sqm of new retail supply (includes projects that have completed and are under construction) is expected to be added to the Australian retail market. However, if both Masters and Bunnings projects are excluded, that figure falls to just 297,900 sqm, a decrease from the 349,400 sqm (exclusive of both retailers) in 2010. Similarly in 2013, retail supply is expected to total 337,600 sqm, but if the Bunnings and Masters are excluded, retail supply is expected to decrease further to 282,700 sqm.

While the forward pipeline of new additions remains thin (on this exclusive basis), a number of major landlords are increasingly investing in existing core retail assets to maintain and improve competitiveness. This is being done in a number of ways, including; improved marketing, improved tenancy mix and most importantly, improving the physical space through refurbishment and extension projects.

The challenging discretionary spending environment and selective consumer spending habits are driving both landlords and retailers to enhance their offering to try and capture a greater proportion of the smaller discretionary spending pool. We therefore expect the impact of this refurbishment and extension activity to have a modest impact on retail supply, but supply of core retail space will remain below trend for at least the next few years.

About the author
Anita Tang is a Research Analyst for Jones Lang LaSalle, based in Sydney, Australia.

This entry was posted on Friday, August 3rd, 2012 at 10:07 am and is filed under Australia, Retail Research. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Source: http://www.joneslanglasalleblog.com/APResearch/retail-research/is-retail-construction-activity-in-australia-really-rising

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