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RetailPROPERTYSPECIAL REPORT Retail down turn more perfect storm than FEATURE rent recalcit rance Key takeaways • Vacancies worsened Charter Hall and ISPT in close prox- by oversupply of imity to the historic arcade, with new shops redevelopments of Raine Square and Forrest Chase transforming • Landlords willing their CBD offerings and luring ten- to invest are ants to shiny new premises. Outside of the city, billions have experiencing leasing been invested in recent years success upgrading some of the city’s big- gest shopping centres, with $350 • Opportunities Dan Wilkie million recently spent at Westfield [email protected] emerge in food and Carousel, and the ongoing $800 mil- beverage services WALK through Perth’s lion redevelopment of Karrinyup Piccadilly Arcade offers a Shopping Centre the state’s biggest • Centres evolving Aglimpse of the challenges construction project outside of the their offering currently facing Western Austral- resources sector. to meet specific ia’s retail sector. In the past two years, more community needs What was once a thriving shop- than 300 new tenancies have been ping arcade has been reduced to a created via new developments or thoroughfare connecting the Hay expansions of existing centres, Street and Murray Street malls, including DFO Perth at Perth with a mass exodus of tenants to Airport, Raine Square, Westfield allow for redevelopment works Carousel, Forrest Chase, and Man- contributing to a growing percep- durah Forum. tion that Perth’s CBD is no longer And according to the centre a vibrant or interesting shopping owners, most of which are ASX- destination. listed entities or superannuation However, the reality is that Pic- funds, those new shops are more cadilly Arcade’s offshore ownership than 95 per cent occupied. group has responded to a rapidly Lease Equity managing director evolving retail scene by investing Jim Tsagalis said the unprecedented in a major upgrade. investment in Perth’s biggest shop- COUNTER: Jim Tsagalis has pushed back on perceptions that landlords’ high rents have About $350 million has been ping centres had substantially created Perth’s retail challenge. Photo: Gabriel Oliveira invested by institutional funds increased competition to sign up RETAIL PROPERTY 2019 - RECENTLY COMPLE TED DEVELOPMENTS Mandurah Forum Westfield Carousel DFO Perth Forrest Chase Raine Square Owner ISPT and Vicinity Centres Scentre Group Vicinity Centres/Perth Airpo rt ISPT Charter Hall Redevelopment cost New store additions $ $ 2018-19 62 350m 110 350m 113 N/A 40 Occupancy rate % 100 99 99 N/A 97 FEATURE Retail down turn more perfect storm than Landlords unwilling to budge on rents have been blamed for exacerbating rent recalcit rance Perth’s retail downturn, but leading leasing agents say the sector’s problems are substantially more complicated than the cost of tenancies. tenants, which in turn contrib- Instead, Mr Tsagalis said a range hairdressers and beauticians, and uted greatly to the proliferation of of factors had converged to create There are quite a few wellness providers such as mas- vacant shops not just in the CBD, but what he described as the perfect sage therapists. also in high streets across the city. storm for retail property, with the factors happening at once; However, she cautioned new “What’s happening is the landlord state’s wider economy, albeit at the entrants to the market to be mind- is taking by far the greater risk, and nascent stages of recovery, one of the greedy landlord piece is a ful that they were not just following given the fact that those develop- the biggest contributors. a fad or a short-term trend. ments were kicked off prior to the “There has been a very sharp really naive take on it - Jim Tsagalis “If there was a new business out issues in the market, the plane has decline in the economy and there there looking to start, it’s about taken off and it needs to land,” Mr has been increased pressure “There are quite a few factors success, without a doubt,” Ms finding that niche and how you are Tsagalis told Business News. through a lot of listed companies, happening at once. The greedy Manifis told Business News. going to fulfil that space that isn’t “I won’t say that they give tenan- the miners and the like, to reduce landlord piece is a really naive “At the end of the day they still being met in the market at this point cies away, but they certainly find costs,” he said. take on it.” see retail as a solid investment, in time,” Ms Manifis said. very creative ways to lease them.” “That’s had a trickle-down JLL WA head of retail prop- which is evident in JLL’s manage- “Wellness is a huge trend, retail- Much of the commentary around effect, making people really pull erties Ann Manifis agreed that ment portfolio. ers are starting to play in that space; Perth’s retail struggles has focused their belts in. Perth’s retail problems could not “If they are doing their market it’s just whether they are able to on rents, and whether landlords “There has been a Royal Com- be entirely blamed on landlords, research and know what their get into that traditional brick and were willing to meet a changing mission in the banking industry, who she described as a cautiously consumers are responding to, they mortar shop at this stage. market of reduced retail spending. so there wouldn’t be a person optimistic bunch. are the ones who have success. “They need to make sure that But Mr Tsagalis said that analysis who either hasn’t been told by Ms Manifis said while many “But also if a vacancy does if they are wanting to go into that was too simplistic. their bank that they have to stop landlords had recognised the var- become available it’s about look- shopfront, they need to have a solid “It’s certainly not a question in spending or they can’t get finance ious headwinds affecting retail ing at that space not just how it plan behind them. It’s not just about our experience of landlords’ will- because the pool of funds being property, those who were willing is, it is what can be done with it opening a door and hoping custom- ingness to transact,” he said. lent has been reduced. to invest were experiencing leas- potentially. ers come. “In a general sense, landlords are “The number of new housing ing success. “At some of our assets we have “They need to have a plan behind all educated or aware of where the starts is around an all-time low, “The landlords we are working done some remixing or split up them, which includes an online pres- market is and the fact that the com- that has a negative multiplier with, without a doubt they tell us a tenancy or combined it with ence so they are able to deliver that mercial terms that need to be struck effect; then add to all of that, it’s a more challenging market, but others, to be able to get that right way as well. are not what they might have been when there was a change to the if we have a centre where land- outcome not only for the centre “The days are gone where you can previously. planning legislation to an activ- lords are investing in their centre but for the landlord as well.” make the assumption that you don’t “There certainly seems to be some ity centre platform, every major and understanding what’s hap- Ms Manifis said JLL had iden- need to do anything other than have quarters suggesting that landlords landlord, shopping centre-wise, pening with the market, knowing tified significant opportunity for a shopfront, because consumers can are not meeting the market, but jumped at it, there was a huge where it sits with its target demo- new retailers, particularly in food readily access information, so how that’s simply not the case.” uptick in supply. graphic and market, we are having and beverage and services such as we want to shop has changed.” Mandurah Forum Westfield Carousel DFO Perth Forrest Chase Raine Square Owner ISPT and Vicinity Centres Scentre Group Vicinity Centres/Perth Airpo rt ISPT Charter Hall Redevelopment cost New store additions $ $ $ 2018-19 62 110 113 150m N/A 110 m 40 75m Occupancy rate % 100 99 99 N/A 97 FEATURE RETAIL PROPERTY CHANGEMAKER: Matthew McNeilly says he believes the future of retail is around inclusion and a unique local offering. Photo: Gabriel Oliveira Shopping centres meet the market The $270 million redevelopment of Fremantle’s Kings Square is indicative of the experiential emphasis retail property owners are embracing across the city. Dan Wilkie tenants (see page 20), shopping thinking of experience first and locals to come along for the ride of Perth’s largest local shopping [email protected] centre owners are going to new foremost, and retail probably with us and they have been very centre owners, Hawaiian. lengths to establish an all-impor- hangs off that.” influential in what we are ulti- Hawaiian is the WHILE the owners of Perth’s tant point of difference. Mr McNeilly said the vision for mately looking to deliver down landlord of The Mantle, a mul- largest shopping centres are At Fomo, Sirona Capital Fomo was developed through an there,” Mr McNeilly said. ti-tenancy food-and-beverage collectively seeking to estab- managing director Matthew extensive program of consumer “It is very much an authentic space designed to be a business lish new high street shopping McNeilly said that meant build- behaviour research, to under- Freo experience; I didn’t want to incubator in the hospitality precincts around their redevel- ing anything but a typical big box stand not only the Fremantle land a spaceship in the middle of sector.

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