Research and Forecast Report Accelerating success. RETAIL First Half 2019 EXPERTSIN PROPERTY DATA & INSIGHTS Colliers Edge is a subscription service developed by our in-house property research specialists, drawing on the expertise of our national network of operators. DEEPER INSIGHTS LIMITLESS SUPPORT FAIRER PRICING Largest data set Analyst not operators Tailored to your needs on market today Want better insights, faster? Talk to a Colliers Edge expert today Joanne Henderson Director | Research +61 410 391 093 [email protected] colliers.com.au/colliersedge Accelerating success. CONTENTS Retail snapshot 4 National overview 5 New Zealand 8 Sydney CBD 10 Melbourne CBD 13 Brisbane CBD 15 Gold Coast 17 Adelaide CBD 19 Perth CBD 22 Centres 24 Large Format Retail 26 Our experience – Retail 28 Retail | Research & Forecast Report | First Half 2019 3 RETAIL SNAPSHOT AVERAGE GROSS AVERAGE MARCH 2019 FACE RENT MOVEMENT YOY INCENTIVE LOWER YIELD UPPER YIELD AVERAGE YIELD SYDNEY CBD $12,825 9.4% 3.9% 5.5% 4.7% Regional $1,950 14.0% 4.0% 5.5% 4.8% Sub regional $1,275 17.5% 5.5% 7.0% 6.3% Neighbourhood $1,000 16.0% 5.5% 7.3% 6.4% Large Format $492 8.0% 6.3% 7.5% 6.9% MELBOURNE CBD $7,500 7.0% 4.10% 5.5% 4.8% Regional $1,750 10.0% 3.8% 5.5% 4.6% Sub regional $1,005 16.0% 5.3% 6.9% 6.1% Neighbourhood $765 16.0% 5.0% 6.8% 5.9% Large Format $278 11.0% 7.0% 8.0% 7.5% BRISBANE CBD $4,250 19.0% 5.0% 6.0% 5.5% Regional $1,550 15.0% 4.3% 5.8% 5.0% Sub regional $1,050 25.0% 5.5% 7.0% 6.3% Neighbourhood $700 23.0% 5.5% 7.0% 6.3% Large Format $355 15.0% 7.0% 8.0% 7.5% PERTH CBD $3,205 15.0% 4.9% 5.5% 5.2% Regional $998 20.0% 5.5% 6.0% 5.8% Sub regional $778 15.0% 6.0% 7.0% 6.5% Neighbourhood $453 20.0% 6.2% 7.5% 6.9% Large Format $203 10.0% 7.2% 8.0% 7.6% ADELAIDE CBD $2,650 15.0% 4.8% 6.0% 5.4% Regional $1,425 20.0% 5.0% 6.3% 5.6% Sub regional $675 30.0% 6.0% 8.0% 7.0% Neighbourhood $510 20.0% 6.5% 8.0% 7.3% Large Format $238 15.0% 7.3% 8.3% 7.8% National Retail Sales 6% 1.4% 4% 1.0% NATIONAL 0.6% 2% 0.2% 0% -0.2% -2% -0.6% OVERVIEW -4% -1.0% -6% -1.4% Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 By Alex Pham Monthly Growth-RHS MAT Growth Director | Research [email protected] Souce: Colliers International Online Retail Sales (% growth rolling 12mth) MARKET HIGHLIGHTS 40% 35% 30% Australian consumers spent nearly $305 billion at physical 25% stores in the 12 months to March 2019, which is 20 times more 20% 15% than the amount spent on online shopping. 10% 5% Nine out of ten of the most visited Australian shopping websites 0% Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 in 2018 belong to traditional brick-and-mortar retailers. NAB Online ABS total online The Australian retail property market continues to offer an Source: Colliers International, ABS, NAB attractive value proposition and more favourable risk-adjusted returns compared to other developed markets. March 2019, which is remarkably slower than the corresponding Retail Market Trends figure of 15.2 per cent a year ago. In light of this, Amazon Australia also reported underwhelming results for its first full year of retail Brick and mortar retailing is here to stay operation with only $106 million in revenue in the financial year In 2017, a research report conducted by Alibaba’s research arm, 2018 (Macquarie Research). This equates to 0.58 per cent of the AliResearch predicted that by 2020 the majority of global retail Australian online retail market (ABS data) and about 0.033 per cent activity would be conducted on digital platforms. However, at of the overall retail market. To put this in context, if Amazon were the time of this writing (May 2019), an overwhelming majority of a shopping centre it would be about the same size in turnover as shoppers continue to enjoy the shopping experience at physical Chullora Marketplace in Chullora, New South Wales or Gateway stores. In fact, retail spending online has slowed, and the fear Plaza in Geelong, Victoria. In comparison, Australia’s largest of a brick and mortar retail apocalypse has been largely over- shopping centre Chadstone generated a moving annual turnover exaggerated. Retail sales through physical shopping channels still (MAT) of 2.1 billion by the end of December 2018. account for over 90 per cent of the total commerce activity globally The slowdown of online retail growth and the lacklustre (Statista 2018). This figure is even stronger for Australia with over performance of Amazon Australia confirm the many challenges 94 per cent of retail activity taking place within physical stores. that pure-online retailers are facing in Australia. According to Also, retail sales growth has been maintained at a stable trajectory, research by Rakuten Marketing, Australian consumers continued relatively in line or better than economic growth. to prefer brick and mortar shops over online shopping. Only 2 Over the 12 months to March 2019, Australian retail sales have per cent of shoppers in Australia would purchase exclusively jumped by 3.1 per cent, the fastest pace of growth since August online compared to the comparative figure of 7 per cent in the US. 2017. The retail sector has outperformed the economy as a whole, Furthermore, numerous case studies have indicated that online which grew by 2.3 per cent over the year to December 2018. and offline retailing in Australia are complementary as opposed According to the Australian Bureau of Statistics (ABS), Australian to supplementary as an overwhelming number (78 per cent) of consumers spent nearly $305 billion at physical stores in the 12 Australian consumers continue to shop both online and offline months to March 2019, which is 20 times more than the amount simultaneously (Rakuten Marketing, 2018). As such, Colliers spent on online shopping of $15.6 billion. While online retailing International believes that the future of retail is neither exclusively continues to grow, its momentum has moderated over the past online nor offline, but a mix of both and brick and mortar retail 12 months. Estimates by the National Bank of Australia (NAB) will continue to play an essential role within an omnichannel retail show spending on online retailing has risen by 5.0 per cent YoY in world. Retail | Research & Forecast Report | First Half 2019 5 The emergence of “boundaryless” retailing The top 10 most visited Australian shopping sites Australian retailers have recognised the importance of multi- Jbhi­.com.au Bunnings.com.au channel retailing and are increasingly adopting the new approach. Woolworths.com.au Our analysis of data from CupoNation reveals that 9 of the top Kogan.com Kmart.com.au 10 most visited Australian shopping sites in 2018 belonged to Coles.com.au traditional brick and mortar retailers. JB Hi-Fi led the pack with the Oceworks.com.au Harveynorman.com.au most popular retail website attracting over 74 million local visits Bigw.com.au Target.com.au in 2018. The runner-up was Australia’s leading retailer of home 0 10 20 30 40 50 60 70 80 Total number of visitors in millions improvement and outdoor living products Bunnings Warehouse, which attracted almost 69 million visits to its online website over Source: Colliers International, Cuponation the 12-month period. This is despite a slowdown in the residential Total Investment Value market and with Bunnings yet to have a full-line e-commerce 10.0 s n o i platform. Woolworths (#4) and Coles (#6) were also amongst the l 9.0 l i B top 10 as the supermarket giants beefed up their ‘Click & Collect’ 8.0 7.0 retailing strategy. The top 3 major discount chains Kmart (#5), 6.0 BigW (#9) and Target (#10) also made the cut as well as household 5.0 goods retailer Harvey Norman (#8). Kogan was the only pure 4.0 3.0 online retailer on the list. More importantly, the rise of e-commerce 2.0 sales has not resulted in the cannibalisation of in-store sales as 1.0 0.0 multi-channel retailers continue to report positive same-store sales 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD19 growth across their physical stores. Source: Colliers Edge Our anecdotal evidence also suggests that there is a positive Investor Composition correlation between an increase in website traffic and a rise in 100% physical footfalls by omnichannel retailers. This is consistent with 90% 80% findings from retail research house Retail Drive, which showed 70% that 67 per cent of consumers would research products online 60% 50% before purchasing them in brick and mortar stores. This is a 40% reflection of a paradigm shift in consumer behaviour toward a 30% 20% web-influenced in-store purchasing activity, which is often called 10% 0% Research Online, Purchase Offline (ROPO). We forecast ROPO will 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 become a significant trend that dictates the purchasing behaviour of Domestic O shore Australian consumers, particularly of the millennial and digital native Source: Colliers Edge generation.