Y RESEARCH THOUGHT LEADERSHIP CBD TO CENTRAL SHOPPING DISCTRICT A BLUEPRINT FOR THE CBD RETAIL PROPERTY MARKET FOR THE NEXT DECADE

NOVEMBER 2017 To discuss this Thought Leadership study or any Y Research Report further, please contact:

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CBD To Central Shopping Disctrict - November 2017 2 REDISCOVERING WHAT MAKES SHOPPING IN OUR CBD SPECIAL

The state of the Perth CBD retail market has been a topic of conversation for the last couple of years around Government workshops, the media and family dinner tables.

These discussions have highlighted many issues for the current state of CBD shops - the cost and availability of parking, the economic downturn, fewer office workers, the impact of major construction and more. On the flip side, there have been many suggestions made - make parking free, redevelop older centres, add pop up shops, more festivals and events and more.

What these discussions have largely ignored is that the current market conditions in the Perth CBD are a result of long term structural change to the Perth retail property market. The Perth CBD’s role as WA’s retail destination has been diminishing for over 50 years.

Shopping in the CBD used to be special. A generation ago, day trips into the CBD for shopping and entertainment, although not a regular occurrence, were memorable. My mother can recall trips into the Perth CBD to shop with my grandparents to visit or Aherns, to watch a movie at the Piccadilly and have a toasted sandwich for lunch at the Forum or Boans Cafeteria. She can even recall as a very, very young child (she would like this stressed as she tends to be delicate about her age!) riding on trams in the Perth CBD and via trains with personal compartments.

While shopping was a reason for the trip, it was not what made them memorable. Trips to the city were about more than just visiting the shops. It was the travel in, walking through the malls and seeing or trying things not available elsewhere. It was these experiences that have stayed with Western Australians long after the items they purchased, and the stores where they purchased these items, have disappeared from Perth’s retail landscape.

In the modern era, with suburban shopping centres and the internet which allows us to order practically anything from anywhere, how can we make a trip into the CBD special again?

CBD To Central Shopping Disctrict - November 2017 3 UNDERSTAND THE COMPARATIVE CREATING A POINT OF DIFFERENCE CBD RETAIL OFFER WITH SUBURBAN SHOPPING CENTRES Within the CBD’s major retail complexes, there is approximately 135,000 sq m of retail space. These centres contain slightly less The advent of suburban shopping centres in the 1960s and 70s, than half of the 900 specialty stores operating in the Perth CBD, with advanced offerings like air-conditioning and car parking, according to the City of Perth. slowly eroded the primacy of the Perth CBD. You didn’t need to visit the city to go to the movies or a department store. As retail Key features of the CBD retail property market include: two has evolved, there are very few things that you can only get in the Department stores, a discount department store, international CBD. The extension of Sunday Trading outside the CBD in 2012 retailers, such as H+M, Zara, Williams Sonoma and the Apple eliminated the city’s competitive advantage. shop, four supermarkets (including a small IGA), currently no cinemas and a myriad of food + beverage and fashion offerings. Since this time, the CBD has largely failed to articulate why people should choose to visit the city over suburban centres. Including the retail space outside of the main retail complexes, This problem will escalate over the next 5-10 years as the Perth CBD retail property market is comparable in size WA’s suburban shopping centres undergo a once in 25 year to the combined areas of Lakeside Joondalup and Carousel redevelopment boom. According to Y Research’s May 2017 shopping centre in Cannington. In these two centres there are Metropolitan Perth Shopping Centre Development Report, two Department stores, 5 discount departments stores, limited 49 projects, a mix of expansion to existing centres and new international retail (H+M at Joondalup), 6 supermarkets, two neighbourhood centres, are forecast to be completed between cinemas and over 500 specialty retailers. 2016 and 2020. By the end of the decade, these developments have the potential to add approximately 25.8% to metropolitan Foregoing the balance of Perth’s retail supply (shopping Perth shopping centre supply. centres, large format retail and main street), the difference between this select comparison is expanded offering in terms In total, these developments are worth an estimated $5.1 billion of supermarkets, discount department stores (people are dollars and will create nearly 50,000 jobs in their construction unlikely to go to the CBD to get a discount on whitegoods) and and operation. Upon completion, these centres will be home to cinema offerings. The CBD’s emerging point of difference is new supermarkets, department stores, discount department in international retailers but this advantage is being narrowed stores, international retailers and an estimated 1,480 additional by the planned redevelopment of Perth’s suburban shopping speciality retailers. centres.

The bulk of development will come from the once in two What is clear from this analysis is that the CBD will never be decade expansion of Perth’s major shopping centres. The able to compete with suburban shopping centres on measures 2010 introduction of the Activity Centres Policy has facilitated like range of stores, parking or convenience of location. So how changing major regional centres from big retail boxes to can the CBD compete with suburban centres? community focal points encompassing a broader range of

CBD To Central Shopping Disctrict - November 2017 4 uses. The wave of development will create entertainment hubs Scale - H+M occupy a 4,000 sq m store in the old GPO; in across Perth’s suburbs. No longer just food courts, centres will Joondalup they occupy a 2,200 sq m store. The city can evolve to establish dining precincts with top line restaurants and taverns. offer more flagship stores such as City Beach offering a fuller In limited examples, there is space planned for concerts. product range than smaller suburban stores. Refurbished and expanded cinemas are a key feature despite the rise of streaming services. New service based retailers will Uniqueness – there are already over 900 speciality stores in become main stays of larger regional centres. Gyms, childcare the CBD; many are unique offerings. The recently announced centres, medical centres and children’s playgrounds will create tenants of Yagan Square are a mix of successful food truck daily interaction in expanded centres. operators and hidden secrets from the suburbs expanding into the CBD. Stores at Yagan Square will have non-standard How can the CBD compete with the experiences offered by these offerings such as Hawaiian poke bowls, a speciality honey store centres in a location 5 -10 minutes from home? and an up-market deli. These new offerings, close to public transport, office workers and the Northbridge entertainment The CBD is undergoing its own redevelopment wave with major area will bring people to the door of the CBD. centres , Carillion and Raine Square having commenced or planning to commence redevelopments between Experiences – the open-air atmosphere of the city during major 2017 and 2019. The MRA have invested nearly $75 million into events and festivals cannot be replicated within the confines the retail component of Yagan Square, set to open in 2018. In of a shopping centre. From once in a lifestyle events like the total, these developments are worth nearly $300 million dollar Giants, to once a year events like Skyworks/Fringe/the winter and will revitalise the retail offering in the CBD. lights festivals/or Christmas lights, through to structured regular events like the Hawkers Market, to unstructured events At Raine Square, cinemas will return to the CBD, with Palace like waiting in a crowd to go to a concert or sporting event, Cinemas operating a 12 screen, 750 seat complex. The these experiences are difficult to recreate. Events in suburban Forrest Chase redevelopment will link the existing centre to centres such as performances by Australian Idol contestants neighbouring City Central. The development is seeking to hardly compare. Experiences that bring people to the CBD will bring “best in class” retailers back to the city. At Yagan Square, ultimately bring retailers in as well, furthering the CBD’s point of around 6,000 sq m of retail space will be added to the CBD. The difference. development, which will become Perth’s version of Federation Square in Melbourne, creates a meeting space for up to 45,000 Issues such as parking will be of a secondary concern if people (comparable to a capacity Subiaco Oval). consumers have a reason to be in the city. Speaking of consumers, who shops in the CBD? So how do these developments help existing Perth CBD retailers compete?

CBD To Central Shopping Disctrict - November 2017 5 WHO ARE THE PERTH CBD SHOPS FOCUS ON DEVELOPING THE FOR? EXPERIENCE OF VISITING THE PERTH CBD The CBD’s role as the central business district and at the centre of transport links, should feed people (potential customers into The Experience Perth brand has been around for a number of the CBD). What isn’t defined or articulated is: who do our CBD years. What is your favourite retail experience in the CBD? shops operate to service?

One of my favourite memories of the CBD was prior to >> CBD workers? Perth Wildcats’ games at the Entertainment Centre (since >> CBD residents? demolished), where a few mates and I would sit in the back row >> Tourists? on $8 dollar tickets, was buying a toy football from Toys R Us >> Broader Perth? (also demolished to make space for ENEX 100). We would then >> A combination of all the above? play football using the light posts in as goals.

Given that there are approximately: Given the through traffic to the new Perth Stadium (in Burswood), can’t we turn Forrest Place into a pop-up football >> 135,000 CBD workers; stadium every game day? Cover the area with astro turf, pop up >> 27,000 residents in the City of Perth; bars/BBQ, goalkicking/handball activities for kids. With the train >> 4.8 million overnight visitors to the Perth region in 2016; and station opposite, an activated Forrest Place could encourage >> 1.94 million residents in the metropolitan area. people to stop in the CBD, prior to or after events at the new stadium. It is obvious that for CBD retail to more than survive, but rather thrive, it needs to serve a combination of the above as well as The CBD has a good track record of events such as the ice focusing on the broader Perth catchment. rink during school holidays, the Winter Lights Festival, Perth Twilight Market, Christmas Tree lighting, pop up events at The level of CBD workers is unlikely to change significantly in /Supreme Court Gardens. The key question is: the years ahead with office vacancies forecast to remain around who are we creating experiences for? The target markets of CBD 20% till the end of the decade. The moves by a number of major consumers require different strategies and, secondly, how are we owners to increase the retail amenity of their properties will communicating these events to the broader Perth market? see office workers stay in their buildings rather than visit the broader CBD.

While the population of the Perth CBD continues to grow, the services that residents require such as supermarkets are located away from the 6,000 apartments east of Victoria Avenue or the 2,000 apartments in West Perth. This leads to City of Perth residents shopping outside the City of Perth in Victoria Park, South Perth or Subiaco. Similarly, a significant proportion of CBD hotel supply is located away from the core retail offering of the CBD.

The key questions then become: how can the Perth CBD attract people back into the CBD and better support its daily constituents – workers, residents and tourists?

IDEAS FOR BRINGING THE SPECIAL BACK

To paraphrase Tom Cruise in Top Gun – the Perth CBD “has the lost the special feeling”. We need to work on initiatives to make visiting the CBD memorable again.

The key challenge in retail, globally, is bringing people to the front door. What initiatives will attract consumers, retailers and investment into the Perth CBD retail property market?

CBD To Central Shopping Disctrict - November 2017 6 IMPROVED CO-ORDINATION – BETWEEN RETAILERS, RETAIL PROPERTY OWNERS, GOVERNMENT. ATTRACT UNIQUE RETAILERS

The ownership structure of Perth’s retail property market is With consumers spoilt for shopping options, retail property highly fragmented. While there are major owners (ISPT, Dexus, owners are evolving to create points of difference either in their Charter Hall, Star Hill and CBus), there are over 100 different tenancy mix or in the services offered in the centre. owners of CBD retail properties. In comparison, there are less than 10 owners in Sydney’s Pitt Street and Melbourne’s Bourke The challenge for the City is to continue creating points of Street malls. difference either through new international retailers, pop up stores and events (such as the Christmas Tree lighting). As With this level of fragmented ownership, and taking into account outlined, the announced tenants of Yagan Square are a great the different financial means of owners, it is difficult to market example of successful, different offerings relocating to the CBD. CBD retail. Encouraging greater co-ordination between key stakeholders is required. Improved marketing of the CBD The continued attraction of flagship stores is key combined with through traditional media and social media is needed. A central temporary pop up stores to activate vacant stores in the short platform, website with a CBD store directory, social media term. In Fremantle, temporary multi-tenant space, MANY, kept accounts, supported by staffing is needed. the old Myer store activated prior to the development of Kings Square. The offer was so well received it has evolved to become Moves to attract unique, independent tenants, who will have part of the full time retail landscape of Fremantle. limited marketing budgets, require more central support. Measures to highlight a “Retailer of the Day” could be Pop up stores, in addition to activating space and connecting the introduced. Major shopping centres are having individual malls and arcades, are the precursor to the sentence: do you marketing budgets; the CBD needs a strategy to compete. In the remember the time when we got….? current market, the CBD runs the risk of redeveloped centres all moving to offer the same type of retailers, further reducing the As much as we believe our spending habits are based on rational need to come into the CBD. thought, numerous studies have shown that retail is about emotion, scarcity (the must have item that runs out/ or the new Fundamentally, the CBD needs to speak to consumers about item that is worth camping out for) and desire (not just things we “our city”, not our centre or our store. need but things we want/can’t live without).

Today’s pop up may become tomorrow’s just pop in again.

CBD To Central Shopping Disctrict - November 2017 7 ENCOURAGE FURTHER arrangements. People aren’t visiting the CBD to buy an IKEA flatpacks or whitegoods; there is no requirement to have a car. REDEVELOPMENT OF PERTH’S People in Perth are conditioned to drive, not take MALLS public transport.

The cost of parking can lead to people shopping on the clock As outlined there is significant retail development planned to make sure that they make it back to their car before their across WA’s suburban shopping centres as well as major centres ticket expires. This encourages mission shopping where people in the Perth CBD. Over $5 billion dollars is set to be invested in search for a particular item, buy it and then leave. The CBD is retail development in WA over the next 5-10 years. better suited to leisure shopping, walking through the malls and arcades, having a meal/coffee/drink over time. It is currently Further redevelopment is required to offer the scale of unfeasible to reduce the price of parking in the Perth CBD due opportunities required for flag ship CBD stores. Many stores to the State Government Perth Parking Levy. Each of the 51,856 along Perth’s malls are smaller than 400 sq m. Flag ship stores car bays in the CBD pay $1,107.70 per year to improve public require more than 1,000 sq m. Looming strata title reform will transport in the CBD and reduce congestion. The policy was make it easier for retail developers to acquire multiple sites for developed to reduce car use in the CBD; it has worked too well redevelopments. Westfield’s redevelopment of Pitt Street Mall in when dealing with potential CBD shoppers. Across the 16 largest Sydney is a roadmap which could be followed. But what shopping centres in WA, there are approximately 46,690 car bays about parking? which pay nothing.

FORGET ABOUT PARKING – MAKE The Perth Parking Levy raised $57.9 million in 2016-17 and PUBLIC TRANSPORT FREE after paying for free public transport in the CBD and other infrastructure investment, the Levy raises a surplus of over $20 million per year. Could this money be spent to make public Making parking free has been offered as the silver bullet to fix transport to the CBD free every Sunday? Sunday trading, before the Perth CBD retail market. extended trading hours, was crucial to the success of CBD retail. Making the CBD more accessible, combined with other The cost of parking and availability of bays right next to the malls initiatives, will bring people back into the CBD regardless of the are a convenient excuse for people not to visit the CBD. Parking price of parking. has become a central issue because it’s easier to make parking free than solve the real issue developing an answer for why people should shop in the CBD. MAKE TRANSPORT ACROSS THE

Convenience is the key driver of retail spending. People shop CBD EASIER at local neighbourhood centres for daily staples (milk/bread/ With the CBD’s existing car parks on the fringes of the city, formerly the paper) and at larger regional centres for food, improving transport links across the CBD is needed. The fashion and services. A recent Y Research study highlighted that CAT Bus system helps but is offered on a reduced basis on 45.5% of retailers in Perth’s largest 16 shopping centres are weekends. exactly the same. What is the overlap between shopping centre tenants and CBD tenants? Consumers can visit Myer, Target, The potential for light rail through the mall and improved cross David Jones, even H+M, Zara and Apple in the suburbs. Why city connections with West Perth residents, UWA students, QE11 would they come in to the CBD? medical centre employees and people visiting the Crown and the Stadium will increase the daily catchment area of the CBD retail If the CBD offered unique stores and unique offerings, property market. people would pay for parking or make alternative transport

CBD To Central Shopping Disctrict - November 2017 8 ENCOURAGE THE DEVELOPMENT OF DIFFERENT PRECINCTS IN THE PERTH CBD

Given the scale of the CBD, marketing plans are required to develop different precincts in the CBD which can offer consumers and retailers a variety of choice. The launch of Historic Heart to rejuvenate a section of the east end of the CBD has been an affordable initiative driven by property owners and supported by Government. Works are underway to improve signage and laneway lighting, install CCTV and planter boxes as well as establish alfresco areas and bike racks.

Similar efforts could be established for the Hay and Murray Street malls, West Perth, Northbridge and Wellington Street, particularly if property owners and businesses are willing to take the lead.

CONTINUED GOVERNMENT SUPPORT

A number of the initiatives listed above require Government support either in funding or staffing. Given competition for scarce dollars, funding priorities need to be established and private sector co-funding sought.

Issues with our CBD are too big for one owner or one council to solve. Collaboration is the key to turning around the Perth CBD retail market.

CBD To Central Shopping Disctrict - November 2017 9 CONCLUDING THOUGHTS

Defining the CBD’s point of difference to suburban shopping centres is key to capitalising on the wave of redevelopment of retail assets in the Perth CBD.

Giving people a reason to visit the CBD (international retail, events, pop ups stores) and forgo local convenient shopping options is the key challenge.

Some simple first steps:

>> Establish a Perth CBD retail taskforce consisting of owners, retailers and Government. >> In the lead up to Christmas, run a campaign encouraging employers to give their CBD employees longer lunch breaks to explore CBD shops. >> Beyond Christmas and the Fringe festival, develop plans that allow the CBD to maximise the benefit of crowds coming to the CBD, for sporting events (in particular the new Stadium), concerts or special events.

The CBD:

>> Needs activation over inactivity; >> Would rather see people have empty wallets (from shopping) than empty stores; >> Memories of tomorrow are created from the experiences of today.

The only real choice now is where to start?

CBD To Central Shopping Disctrict - November 2017 10