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A new report has flagged a 2.2 million-square-metre future shortfall of retail spaces across the country.
Colliers’ Population Growth and Implications for the Retail Sector report has flagged that expectations of a 15 per cent increase in Australia’s population over the next decade could see a massively undersupplied retail environment.
Colliers has pointed to the government’s projection of a national population of 29.8 million by 2032, and is predicting an extra 2.2 million square metres of floorspace will be required over the 10-year period.
If unremedied, it will see demand outpace market supply within Australia’s retail centres to the tune of 2.2 million square metres.
According to Colliers managing director of Asia Pacific Retail Capital Markets, Lachlan MacGillivray: “Just to maintain the current per capita levels nationally for Super and major regional centres alone, an additional 1.13 million square metres of floorspace, the equivalent of nine Westfield Bondi Junction centres, will be required.”
Acknowledging that centres of this size “are nearly impossible to replicate due to land constraints”, Mr MacGillivray believes the existing assets within this high performing asset class “will be the beneficiaries of population growth”.
He argues “it would be impossible for new developments to replicate the success of Super and major regional centres, which have grown with communities since the 1950s, leveraging loyal consumer bases and frequent visitation”.
In turn, these existing sites are set to absorb “an additional $10.9 billion of retail sales by 2032, which should see specialty sales increase by at least 33 per cent or around $3,000 per square metre”.
And while the undersupply is of concern, the managing director noted outperformance as likely to continue, expressing that “unlike global peers, the irreplaceable locations of iconic Australian retail centres and opportunity for additional uses will draw more customers and drive retail asset outperformance for years to come”.
“We are seeing increased domestic and offshore capital targeting this coveted investment class, which boasts an average of at least one trade area customer visit per week compared to one visit per month for their counterparts in the United States and United Kingdom,” he continued.
This strong backdrop is thanks to the ability of flagship centres to “innovate and create vibrant shopping centre experiences for their local catchments”, according to Colliers’ associate director of research Nik Potter.
“These assets now comprise an average of 41 per cent of experience-based stores and 2.4 supermarkets,” he pointed out.
As it stands, 11 “iconic“ centres across the country are currently seeing turnover in excess of $1 billion annually – a feat which Mr Potter said was an improvement on the six that had done so pre-pandemic.
Mr Potter also pointed out that positive momentum is also being seen in rental growth for “Super and major regional assets”, which boasted annual market rate growth of +1.6 per cent over Q3 2023.
The director of research said that in the context of a looming major undersupply, the expectation is for positive leasing activity “to continue to increase”.
“The performance of assets across the Australian retail market will be enhanced by population growth, as brands continue to benefit from the halo effect of a bricks and mortar presence for online sales in their local areas.”
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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