Shopping Centre News’ Big Guns Lunch, now billed as the Number 1 Event for the Australian Shopping Centre Industry, attracted most of the major CEOs along with a show of major retailers this year. The lunch launches the Big Guns issue, which ranks the performance of Australia’s major shopping centres.

Launa Inman, CEO of Billabong, formerly Target CEO (and Commonwealth Bank Board member) was on hand along with Next Athleisure’s (Glue, Topshop, Topman) Hilton Seskin. Coles Property Director Greg Chubb attended and Woolworths Property Director Ralph Kemmler was there as was Helen Koo, Australasian MD of Gucci and several other major international Specialty Chain heads.

SCN reported that the Big Gun Centres (those with a leasable area over 45,000m2 and housing one or both of the major department stores Myer and David Jones) held their own in a year of difficult retail trading conditions.

89 centres were ranked this year accounting for some $42.4 billion in annual sales for 2012 – collectively up 1.7% very close to the inflation rate for the year.

Star performer, Colonial First State’s Chadstone, the largest centre in the country, showed a 5.2% increase in MAT (Moving Annual Turnover) to record centre sales of $1.365 billion. Westfield took the next 7 spots with Bondi Junction second at $972.8 million and Westfield Chermside (QLD) third with $876 million.

Shopping Centre News ranks centres on other performance scales, one of which is MAT/m2 or sales per square metre. Mirvac’s Broadway Shopping Centre, took out the honours this year as the number 1 in Australia with sales per square metre of $10,390, Westfield Bondi Junction coming a close second with $10,016 – the only two centres in Australia with sales of over $10,000 a square metre.

But it’s the Specialty Shop performance, which many analysts insist is the real performance measure as this is where most of rental revenue comes from. Westfield Sydney – which this year combines the new centre with Sydney Central Plaza so both sides of the Pitt Street Mall – showed specialty sales of $15,660 per square metre. This means that a shop of 100m2 in Westfield Sydney trading at the  ‘average’ rate, would have a turnover of $1.56 million for the year. At a size of some 167,000m2, it places it as one of the world’s best performing large centres. Chadstone ranked second with a Specialty shop turnover of $14,333 per square metre and Westfield Chermside took 3^rd place with a very creditable $13,692.

The figures appear to be in stark contrast to the current pessimism often reported about the retail and shopping centre sectors. Of the 89 ranked centres, the range in Specialty Shop turnover spreads from the top of $15,660/m2 to the bottom of $6,055. Of these, 28 or 31% have an annual turnover per square metre in excess of  $10,000 and 44 of them or 50% exceed $9,000. This means that at the half-way point, a specialty shop in MacArthur Square, (Campbelltown NSW) – ranked 44 on the list – with an area of 100m2, would have a turnover in excess of $900,000 a year, or an average of $17,300 a week.

The nature of these huge centres is changing dramatically. They used to be shopping precincts and then they moved to shopping plus leisure and entertainment. Now they’re shopping, leisure and entertainment, services, medical and dental centres – they’re just town centres; even the name ‘Shopping Centre’ is out of date and should be revisited.

CEOs at the Big Guns Lunch talked of development pipelines accounting for several billions of dollars. AMP Capital Shopping Centres Managing Director Bryan Hynes listed redevelopments of Pacific Fair, Macquarie Centre, Ocean Keys, Garden City Booragoon in Perth, which account for some $1.5 billion.

John Schroder, Group Executive and CEO Commercial Property, Stockland said the company would complete the $330 million redevelopment following hot on the trail of the over $1 billion development pipeline completed last year, which included Merrylands and Townsville.

The success and the stability of the sector is demonstrated by the variety of funds that arrive here for investment in these major shopping centre projects; almost a billion was secured by AMP for their pipeline and it came from just two sources. Canada Pension Plan Investment Board and Harina Company Limited, a division of the Abu Dhabi Investment Authority, together placed some $872 million into AMP’s Property Trusts. This country is strong, our property market is strong and the major shopping centre sector is as strong as it ever was. These centres, reflect the economic health of the cities and the country in which they sit; if you’re looking for decent yield, low risk, long term property investments that are managed by some of the best and most professional teams in the world, what are you going to invest in that has a better profile than Australian Big Gun Centres? Looks like some large Fund Managers across the globe agree!

2013 MAT $million Top 6

1 Chadstone, VIC

2 Westfield Bondi Junction, NSW

3 Westfield Chermside, QLD

4 Westfield Doncaster, VIC

5 Westfield Sydney, NSW

6 Westfield Southland, VIC

2013 MAT/m2 Top 3

1 Broadway NSW – $10,390

2 Westfield Bondi Junction NSW                  – $10,016

3 Westfield Sydney NSW – $9,716

From the publisher

‘Big Guns’ time. An interesting set of numbers. The bottom line is that retail sales in Big Gun centres rose by the inflation rate – 1.7% in 2012; that’s all Big Guns, right across the country.

It’s obviously not a great result but then it’s not catastrophic either. In real terms it means there was no growth last year in Big Gun Centres, but then neither was there a downturn or a negative result. So we’re not at any desperate stage; we’re not fighting to survive; the wolf isn’t at the door. But we have been given a shake.

For over 50 years we’ve had growth in disposable income and the first recipient of that growth has always been the retail industry. Historically, that’s logical. Sixty years ago, disposable income (amongst the masses) didn’t exist. If you had one pair of shoes, when you got more money you were likely to buy a second. If you ate meat once a week on Sundays (OK, twice if you had left-overs on Monday), with the emergence of disposable income, you were likely to eat it more often.

In direct response to an increase in disposable income, the first supermarket in Australia opened in the Melbourne suburb of Balwyn North on the corner of Burke and Doncaster Roads; it was a Coles and the year was 1960.

As disposable income became a standard and began its exponential growth, so too did the retail industry and as time went on, the line between what we ‘needed’ and what we ‘wanted’ was blurred. We’d entered the age of consumerism.

The challenge faced by shopping centres from here on in, ‘in part’ comes from the Internet. ‘In part’ it comes from lack of service and customer focus by traditional retailers – Department Stores as a prime example. ‘In part’, it comes from overseas travel, a 60% increase in 2012 over 2011. ‘In part’, the challenge to shopping centres from here on in, comes from a shift towards health and beauty, towards Botox, massages, facials, skin treatment, dental cosmetics, personal trainers, life coaches along with all the other focuses on ‘me’.

We could go on and on with other ‘in-parts’; the list would be long yet there is a common thread that links them.

Up to now, people have at first, been discovering disposable income, then appreciating the joys of using it, followed by getting used to it and ultimately accepting it as the norm. The common thread is that people have changed. People using shopping centres today are no longer the people they used to be; their aspirations have changed; their characteristics have changed; their psyche has changed; their values have changed. If our product – the shopping centre – truly is the community focal point and really is a reflection of the community in which it sits, it therefore follows that it too must change. The latest buzzword or phrase out there at the moment is ‘the tipping point’ – lots of little things that together reach a stage at which everything is upset; in the old terms, ‘the straw that broke the camel’s back’.

Perhaps the Internet and more specifically e-retailing is the ‘tipping point’, rather than the major threat. Perhaps the Internet is merely the final straw, with the major threat being quite simply that people have changed; the Internet is therefore a symptom rather than the decease. This means that to ‘tweak’ our centres – to replace a tired fashion operator with Zara or a failed mini-major with Apple – is not the whole answer; it may well be part of the solution but perhaps we need to go much further than consideration of the ‘retail’ issues.

This is a great issue of SCN. It’s the Big Guns issue and therefore incorporates the CEO Outlook feature as well as our usual Cover Story and Centre Profile.

All CEOs address the issue of the changing nature of our centres and in so doing, go much further than merely looking at the ‘retail’ implications.

Bryan Hynes talks about centres “anticipating the preferences and desires of the market, often before they know themselves.” Cameron Gregson says that “the centre is not just the built form but everything the customer experiences to fulfil their emotional needs.” Susan MacDonald takes us on an historical journey of Broadway, giving us a fascinating insight into how the whole nature of the built form has changed – much more than a mere retail reconfiguration.

The Cover Story features Lakeside Joondalup in Perth whilst the Centre Profile looks at Indooroopilly on the extreme opposite side of the continent. Both talk about a major feature of the redeveloped centre being a restaurant and fine dining precinct to meet the desires and aspirations of the market along with other features that are far removed from traditional ‘retail’ operations. Talking to these development teams one understands how different their perceptions are of the entity they are dealing with, than were those of a decade ago.

Over the last few decades, Leasing Executives have become specialists in knowing which retail operations are taking the high ground, which are up and coming, and which are at the leading edge in regards to new trends; very definitely they have been ‘retail oriented’. Perhaps now there is an opportunity to merge marketing with leasing in order to understand and capitalize on the new direction society is taking in regards to its disposable income.

In the words of Philip Kotler, the marketing guru of the 20th Century; “marketing may be defined as the exercise involved in tailoring the product to suit the needs of both the producer and the end user.” In our business, the shopping centre is the producer and the end user is the trade area population.

Leasing is definitely not a selling exercise but very definitely a function of marketing. If we spend half our disposable income on services and half on retail, shouldn’t it follow that 50% of our centres should be devoted to services and 50% to retail. I’m not proposing that, but it is worthy of discussion. From here on in, the Leasing exercise needs to become one of ‘tailoring the product to suit the needs of both the consumer and the producer.

It’s the Big Guns issue; these centres as we all know, contain far more than just retail. And because they do, and because they have become so much a part of the daily lives of the people in the trade area they serve, they have become entertainment and leisure complexes, medical and bureaucratic centres, service centres and subsequently public transport nodes. In fact they are as much a part of community infrastructure as are schools, hospitals and roads.

It is for this very reason that they have become the number one target of responsible pension and superannuation funds for they are totally reflective of the society in which they sit and as such,
are virtually risk free.

The ‘tipping point’ has been reached; the term ‘shopping centre’ is out of date; ‘downtown centre’ has much more relevance. In the next few decades, what do the pubic want from ‘downtown’. That’s the key to the vision. SCN