Retail Market Breakdown - 18th May 2018

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Welcome to TLG's first ever Retail Market Breakdown, for the week commencing May 14th, 2018!

We’ve scoured retail business & property news, research reports & industry commentary in order to provide relevant & concise analysis of key themes, growth trends & deals done in retail. It’s a quick read, that cuts through the noise for you. Enjoy!

Budget boosts consumer confidence

Budget boosts consumer confidence – consumer confidence has risen for the fifth straight week. Figures released in the weekly ANZ-Roy Morgan Australian Consumer Confidence index show a one per cent rise in sentiment to 120.8, the highest point in 14 weeks. On average, confidence has fallen 1.2% in the week of the Budget release over the last five years – the income tax cuts in this budget mean consumers are bucking that 5 year trendas retail veteran Greg Harvey put it, “it’s a good budget for business”. Households are also feeling more optimistic and their future financial positions. This bodes well for Q2 retail spending. Click to read the full article.

Westfarmers looking to offload Kmart Tyre & Auto

Wesfarmers is looking to offload Kmart Tyre & Auto Service, according to the AFR. Bunnings seems to be just about the only segment of their business the conglomerate haven’t looked like selling or separating into another entity – this list includes Coles, Kmart, Target & Officeworks. The reason they’re seeking a buyer is strategic – the independent car servicing market is being squeezed (as it has been for some time) – facing both rising competition from other independents, and structural disadvantage compared to the official car dealership service businesses. Basically – cars’ increasing complexity, and the offer of several years’ servicing with every sale, means servicing is largely tied up in dealerships. It’s an interesting theme, which will be sure to affect the market for large format retail in the next couple of years. Read the full article.

Retail sales up, CBD rents to stay level

The CBRE Australia Retail MarketView Q1 2018 shows retail sales grew by 2.5% y-o-y (3mma) in the year to February 2018. It also predicts national CBD rents to be relatively unchanged in 2018. Performance across the retail market remains bifurcated – luxury performing well, whilst mid-tier fast fashion groups experiencing slower growth. The emerging ‘Diagou’ retail segment continues to grow and become more formalised. And Sydney’s CBD super prime strip (Pitt St mall) continues to perform well as new entrants look to George St to capitalise on lower rents, improving amenity and visibility in anticipation of the light rail and pedestrianisation. In this way, the number of store closures over the past six months can be seen as just one part of a relatively soft yet stable sales environment. Read the full report.

Tipalea unveils $90m Alexandria project

Tipalea unveils $90 million Alexandria project. Green Square is anticipated to be the most densely populated region of Australia. It’s a real alternative to Surry Hills and the Sydney CBD, with significantly lower occupancy costs – 60% of those in the CBD – whilst providing better amenity than nearby Mascot. Tipalea’s 9,300 square metres of retail and commercial space over two four-level towers is connected by a ground floor lobby. 20 percent of all tenant electricity usage will come from solar, at almost no cost, “and these savings will be passed on in full to the tenants and owners”. The expected the assortment of uses will grow to encompass hotel, commercial, industrial and residential. Read the full article.

On the up – social spend & fast fulfilment EDI

Australian Retail Insights Survey 2018 showed that social media suddenly jumped to become a top-3 priority for retailers and brands alike – spending on social video has increased by 49%, as just one example. 70% of companies that reported better than average sales growth have fast fulfilment EDI. Surprisingly, more than half of all companies have no plans for ship-to-store (Click & Collect), which is typically considered popular with retailers, due to the 75% chance of additional purchase during pick up. Also, only 19% of retailers have full visibility to in trading partner warehouses and distribution centres, while almost 40% have partial visibility – pressing the question of just how important automation in warehouse operations will become as retailers continue to compete. Read the full article.

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Philip Reichelt, May 18th 2018

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