Neighbourhood shopping centres a “safe-bet” CBRE report suggests

By Nick Hall | 06 Mar 2019 View comments

Neighbourhood shopping centres are set to feel the effects of consumer demand for convenience, new reports from property group CBRE suggest.

In its latest ViewPoint research report; Neighbourhood shopping centres: What’s convenience worth? CBRE revealed that from 2020, consumers would see an evolution in shopping centre developments. For the first time on record, the number of new neighbourhood shopping centres developed as part of strata title mixed-use developments will exceed those constructed as freestanding assets.

According to the report, supermarket, grocery and liquor retailing accounts for approximately 40 per cent of Australia’s circa $320 billion retail industry.

Supermarkets account for just six per cent of total cash-flow in regional areas and 18 per cent in sub-regionals, however, in neighbourhood centres, that figure dramatically increases.

CBRE research analyst, Freddie Kareh said that shopping centre offerings differ greatly based on the needs of the local community.

“As regional shopping centres seek to drive foot traffic through the provision of entertainment and leisure offerings, and sub-regionals reposition as service centres, the need for neighbourhoods to strengthen their identity as convenience-based centres is as relevant as ever,” Kareh said.

“The importance of supermarket anchors on the viability of neighbourhood shopping centres is two pronged. In addition to the income they generate, they also drive foot traffic and specialty rents.”

The analyst also warned that as shopping centre developments introduce more multi-purpose entertainment and food offerings, they must be wary of the profitability and viability of existing tenants.

“With supermarkets repositioning their offerings and bringing more traditional specialties in house – like bakery, butcher, deli and sushi – centre owners need to suitably remix their offerings to prevent undercutting of existing sales, ensuring specialty tenants remain viable,” Kareh said.

The warning comes after CBRE revealed the sector was heavily reliant on shopping centre appeal, suggesting that cultural evolution had impacted the fast-food industry in regional areas.

Convenience in neighbourhood shopping centres

The CBRE report goes on to detail the changing consumer demand for mixed-use developments, with more residents in neighbourhood areas now looking for small, convenient operators close to home.

“Once considered an inconvenience by many residential developers, the retail component of mixed-use developments has become a point of difference in a changing market. In accordance with a well-integrated design, a strong tenancy mix geared towards the wants and needs of the local community has become a key selling point, providing new developments with ‘kerb appeal’ through the creation of entry statements and places where people want to be,” the report states.

The CBRE report also suggesting that prospective neighbourhood shopping centre tenants were likely to benefit from the developing consumer interest.

“Whilst the retail landscape is changing, neighbourhood shopping centres represent a safe bet – relatively insulated from the overarching threat of e-commerce and well positioned to capitalise on the growing consumer demand for convenience,” the report states.