Regional
A regional shopping centre typically incorporates one full line department store, a full line discount department store, one or more supermarkets and approximately 100 specialty shops. The total gross lettable area retail ranges between 30,000 and 50,000 square metres. In some instances, all other characteristics being equal, a centre with two full line discount department stores, without a department store, serves as a regional centre.
In 2021, capitalisation rates compressed for neighbourhood and sub-regional retail assets, while super and major regional retail cap rates remained relatively stable. The pandemic accelerated the uptake of e-commerce as many physical stores closed due to social distancing restrictions. Australian unemployment rose and the outlook for retail appeared dim, with valuers meaningfully writing down unlisted retail assets. One of the only major shopping centres within 350 kilometres is one of Australia’s top performers reporting total sales of $511 million per annum. Acquisition continues as investors push into the regional and sub-regional retail categories. Transaction volumes of commercial property in Australia sank to their lowest level for a September 2023 quarter in more than a decade, with a “fog” on pricing expectations between buyers and sellers, as well as economic and geopolitical uncertainty, hampering deal activity.
Retail assets in regional NSW have surged in value, reflecting the pandemic rush to regions, and are likely to remain strong over the short term as the movement of people from urban centres is unlikely to unwind quickly. Letting rates are measured as $/m2 across the market, showing a range of assets in this class. The population shift has generally narrowed the spread – or difference in yield – between regional retail assets such as cafes, high street stores and fast-food outlets and their metropolitan equivalent.
Neighbourhood
Neighbourhood retail is defined as local shopping centre comprising a supermarket and approximately 35 specialty shops with total gross lettable area retail less than 10,000 square metres. Small community hubs that offer essential goods and services.
Many convenience-based retail properties have a strong weighting to food sales, due to grocery-based anchors such as supermarkets.
Factors of complexity include evaluating anchor tenants, specialty tenants, gross lettable area, and weighted average lease expiry. There is currently strong investor demand for freestanding defensive assets with well-established tenants.
Real estate, particularly non-discretionary retail, is generally considered to be resilient in value during periods of high inflation. While there are obvious headwinds in the market, the strata sector is performing well, with purchasers drawn to the asset class given its insulation against rising land tax
The typical urban neighbourhood shopping centre around Australia are strong assets due to purpose and necessity, with food-driven needs either through Woolworths, Coles, Aldi, Drakes or the like with a few specialty stores inclusive of baker, barber/hairdresser, chemist and two or three takeaway shops. Neighbourhood shopping centres are typically located in high density residential areas and cater to the basic day-to-day retail needs of the community.
Neighbourhood retail centres have demonstrated remarkable resilience and a faster recovery time compared to larger retail formats, bouncing back from economic uncertainty in just 1 year.
The more recent concept of some business offering flexibility in working from home will change how we view our suburbs and how the money spent within and on them is dispersed.
In a world where regional shopping centres are offering more entertainment and leisure offerings to attract people, and sub-regionals are repositioning themselves as service centres, neighbourhood retail centres are the missing link in the emerging trend of working from home.
In the ever-evolving landscape of real estate investment, neighbourhood shopping centres have emerged as a stable and profitable choice.
Mixed Use Retail
Mixed-use property provides the option of investing in different commercial and residential sectors simultaneously. As the population grows and space in high density urban areas reduces, mixed-use properties are becoming more common.
Mixed-use properties are commercial properties that have more than one property type within the same building or site.
A mixed-use property can be a combination of commercial property types, or commercial and residential. For example, a property could be a blend of office spaces, retail stores, hospitality establishments and residential.
Most commonly, they include residential apartments on the upper levels with commercial or retail spaces on the ground level, while many also comprise retail premises at the ground level and offices above.
Other mixed-use assets include medical tenancies, childcare and hotel accommodation.
The best mix of uses within a mixed-use property will depend on where the property is located and the demand for specific services within that community. Residential and retail connected by community amenity that carries the common theme. Green links and pocket parks lead to a green urban plaza that blurs the boundaries between where the parklands end, and the retail starts.
This is the power of localised retail. People don’t just want to live close to amenity, they want easy access to the elements that together shape their lifestyle and bring identity to their community.
The best mix of uses, how they’re integrated to complement each other, the role retail can and needs to play, depends on the individual site and the community in which it’s a part.
Residents rely on localised retail to meet their neighbours, for convenience, for specialist services including health and medical, and simply to belong.
Far from being rendered obsolete by online shopping or COVID-19, bricks-and-mortar retail is an essential part of mixed-use community building.
Leisure, food & beverage, office space, co-working, residential, healthcare, wellbeing and logistics are all transforming the face of mixed use retail destinations and lifestyle centres, with the latest mixed-use schemes aiming to fulfil a wide range of visitor needs and meet lifestyle requirements that, especially over the past 12 months, have focused on local neighbourhoods.
