SHOP-FREE SHOPPING CENTRES
▶ Australian malls have found innovative ways of countering the preponderance of global brands
As Australia’s local merchants struggle with an influx of global names, leading malls are considering returning to their village centre roots to woo new tenants by moving away from shops and offering medical facilities, more restaurants and even amusement parks.
Several top retailers have recently succumbed to pressure from foreign multinationals such as Japan’s Uniqlo and Sephora of France and with Amazon plotting its debut in the country, the future looks tough.
The response from developers has been to redefine the mall away from a “shopping” focus to become a more community-driven service and entertainment space.
While cafes and restaurants have long helped attract shoppers to malls, they are now filling shopping centres, providing some buzz even as an eerie quiet fills some nearby clothing stores.
With the big global names pouring huge sums of cash into the country, once-popular clothing chains such as David Lawrence, Pumpkin Patch, Herringbone and Rhodes & Beckett have bitten the dust, while others scramble to reduce costs.
This has included cutting back on bricks and mortar stores and steering centre owners towards food, entertainment, healthcare and childcare providers.
Major landlords such as Vicinity and Westfield spin-off Scentre, whose share prices have slipped to one or two-year lows, are already redeveloping their arcades.
Vicinity’s Chadstone Shopping Centre in Melbourne, Australia’s largest mall, is now the site of the southern hemisphere’s first huge amusement park Legoland.
But some investors are pushing to exit the Australian mall market and in global private equity group Blackstone’s case it has not been a straightforward approach. It appears that Blackstone may have regrouped with its investment banking advisers and adopted a fresh approach to sell its A$3 billion-plus shopping centre portfolio, according to The Australian last week.
After first-round bids for the portfolio closed in May, the sales process run through UBS, JP Morgan and real estate firm JLL is now one where Blackstone’s malls are offered in two separate tranches, with the hope a higher price will be secured, sources say.
It is now apparently down to a party based in Malaysia and another in Singapore, although the thinking is that they may only acquire a selection of the centres.
But on the flip side, real estate prices in Australia remain high, as major global funds search for places to park billions of dollars amid a low interest rate environment and when individual assets are still going for top dollar. The pitch for this deal has also been that Blackstone has been repositioning the portfolio more towards food and beverage offerings, which are resilient to the threat of online shopping.
Offered separately within the portfolio of 11 properties is said to be the larger malls – Sydney’s Top Ryde City Shopping Centre and Greensborough Plaza in Victoria.
The remaining secondary assets in the portfolio are thought to be attracting more buyer interest than the other two superior malls.
For those malls battling a change in shoppers’ perceptions, a refocus has become necessary. “What we are seeing is the malls starting to pivot away from commodity-type products... towards retailers that offer a service which isn’t physical,” says the real estate firm Cushman & Wakefield’s retail investments head Nick Potter.
“Shopping centres are the modern village, it’s where everyone comes together. These centres are typically located in the centre of towns, they’ve got strong infrastructure... and that offers up the ability to move with the times.”
The move is a return to the vision of Victor Gruen, an Austrian-born American who in the 1950s developed the concept of the arcade as a public space akin to the market place of centuries past, where civic life played a central role.
Adding to the shift is the growth of online shopping, which offers the same options but with the added bonus of not being subject to general sales tax (GST) for anything below A$1,000 (Dh2,792).
Canberra has sought to end the loophole by imposing a 10 per cent levy from next July but the lower margins for online store such as eBay and Asos still makes them attractive.
While online shopping is estimated to make up a little more than 10 per cent of total retail sales, future arrivals such as Amazon could change that.
“If [online shopping] jumps up in a big way, how does that affect bricks and mortar? Maybe all shopping centres just become cafes,” says the University of Technology Sydney accounting expert David Bond.
“You’ll probably see it move more towards just products being sold online, versus services, cafes, cinemas, game centres and creches [at malls].”
The University of Canberra’s Lisa Scharoun, who analyses the cultural role of shopping centres, has seen the changes first-hand, with more than half of a local mall now filled with restaurants and cafes.
Ms Scharoun says developers are moving away from hosting consumption-driven stores and were more willing to lease space to other users such as churches and libraries.
“I think that the mall is evolving back to what it was actually intended to be when it was first conceived,” she says.
“It was supposed to be like an enclosed community space... a utopian vision of Victor Gruen.”
Major landlords such as Vicinity and Westfield spin-off Scentre, whose share prices have slipped to one or two-year lows, are already redeveloping their arcades