Monster Shopping Centres - Too Much of a Good Thing? July 2006 RETURN
As many of the larger shopping centres sell at record levels, many of the institutional investors are embarking on aggressive expansions, largely in the hunt for better returns to justify the bullish prices they have paid. Work has begun on a further 27,400m2 in local retail space and it appears that expansion is outstripping supply. Quite often the new offerings are only duplicating existing businesses and threatening trader viability. Cashed up Listed Property Trusts and Superannuation Funds are aggressive participants on this market. Watergardens & Chadstone Shopping Town alone are to spend $350m to expand a further 72,000m2. However this insatiable need to re invest in their own centres may be a double edged sword. As the retailers compete more heavily they turn to discount driven volume practices. This threatens trader viability and inevitably leads to lower rental yields for the existing investment. A period of consolidation may be required and we refer to our favourite advice of “make sure you get the fundamentals right”. If you don't the market will dictate matters any way. NB. It is interesting to note at the same time, the CBD retail market is on song with near record vacancy lows. The recent developments at QV, GPO & Melbourne Central happily coincide with existing traders, confirming the CBD as our favourite retail choice. With office space exploding and a 16,000 increase in residents for CBD, Southbank & the Docklands from 2000 to 2010, real demand is fuelling the growth. How pleasing to see the market evolving to foreseeable demand rather than being force fed by over cashed up conglomerates with their own agendas, trying to tell us we need more!
As many of the larger shopping centres sell at record levels, many of the institutional investors are embarking on aggressive expansions, largely in the hunt for better returns to justify the bullish prices they have paid. Work has begun on a further 27,400m2 in local retail space and it appears that expansion is outstripping supply. Quite often the new offerings are only duplicating existing businesses and threatening trader viability. Cashed up Listed Property Trusts and Superannuation Funds are aggressive participants on this market. Watergardens & Chadstone Shopping Town alone are to spend $350m to expand a further 72,000m2. However this insatiable need to re invest in their own centres may be a double edged sword. As the retailers compete more heavily they turn to discount driven volume practices. This threatens trader viability and inevitably leads to lower rental yields for the existing investment. A period of consolidation may be required and we refer to our favourite advice of “make sure you get the fundamentals right”. If you don't the market will dictate matters any way. NB. It is interesting to note at the same time, the CBD retail market is on song with near record vacancy lows. The recent developments at QV, GPO & Melbourne Central happily coincide with existing traders, confirming the CBD as our favourite retail choice. With office space exploding and a 16,000 increase in residents for CBD, Southbank & the Docklands from 2000 to 2010, real demand is fuelling the growth. How pleasing to see the market evolving to foreseeable demand rather than being force fed by over cashed up conglomerates with their own agendas, trying to tell us we need more!