Shopping malls morph into town centres

Aventus Retail Fund has expanded its Belrose Super Centre in Sydney to offer a range of new retail services. Photo: IICONICVanity, health and medical services are the new black in shopping centre tenancies, and are eclipsing sales contributions from traditional apparel stores for landlords.
Nanjing Night Net

Nowadays, doing the banking, getting the teeth checked and updating mobile phones, followed by a mani/pedi and a well-earned coffee before heading to the movies, are what we do in a mall.

That’s not to say that buying apparel has disappeared as a pastime, but it has diminished and led those tenants to look at ways of enticing customers, mainly through more online connectivity.

The battle between the supermarkets is escalating and leading to price deflation but on the plus side has increased foot traffic and sales volumes in the stores.

Department stores have taken up the challenge of the inflow of international apparel and cosmetics brands – a staple of Myer and David Jones – by revamping their offerings with expanded food products in smaller sites.

Two of the larger shopping centre landlords, Vicinity Centres and Stockland, said malls are now seen as town centres for neighbourhoods and will continue to morph into that role.

Both groups reported their full-year results on Wednesday and said the way malls are used by customers has evolved and will continue to do so.

The use of technology will also play a larger part of mall life, with Vicinity Centres signing a $20 million connectivity project with Optus to build a single high-speed digital network with wi-fi capabilities, connecting all retail assets and corporate offices.

This trend has extended to large format retailers, with Aventus​ Retail Fund saying at its results that its centres are now offering cafes, childcare centres and other general retail services to entice customers to linger. The group reported a maiden funds from operations of $41 million, in line with its IPO forecasts.

In the year to June 30, Vicinity Centres reported a statutory net profit of $960.9 million and underlying earnings of $757.5 million, up 9.5 per cent, which was affected by one-off asset sales and other items.

The underlying earnings per security, of 19.1¢, was up 9 per cent, while the full-year distribution was 17.7¢, up 4.7 per cent on the previous year, which compared with an aggregate of Federation Centres and Novion Property Group for the 2015 year when the merger occurred.

Vicinity chief executive Angus McNaughton said the group had completed $1.2 billion of asset sales, worth about $350 million more to come, as part of its portfolio review.

The retail landlord, which owns the Chadstone shopping centre and Melbourne Emporium in Melbourne and the DFO Centre at Homebush in Sydney, said the development pipeline was $3.7 billion, which would roll out new-look shopping centres. He said the re-leasing spreads, between new and old leases, had moved back to positive territory.

Reflecting the demand of shoppers for a range of services at malls were specialty sales, where total centre sales’ moving annual turnover (MAT) grew at 2.1 per cent to June 30.

This was driven by specialty sales growth of an average 3 per cent. But of that, sales from general retail rose 5.7 per cent over the year. This was due to cosmetics retailers expanding and performing strongly and retail sales for pharmacies showing considerable improvement with continued focus on health and wellness.

The retail services tenants benefitted from the growth in hairdressing and beauty services, which pushed its sales contributions up 9.9 per cent over the year.

Stockland chief executive of commercial property John Schroder said for the year the MAT was up 4.6 per cent, with the technology categtory up 11.3 per cent.

“There are retailers in our portfolio that don’t report sales,” Mr Schroder said. “I characterise these as dental clinics, physiotherapists, doctors, financial sevices and other services that used to be on the high street, and they account for about 16 per cent of our portfolio of specialty shops.

“And they are becoming increasingly important, so as a result many of our centres are morphing into town centres.”

This story Administrator ready to work first appeared on Nanjing Night Net.