It’s been a particularly challenging past 12 months for the retail sector as the industry continues to try and grasp the global technological and demographic changes that are impacting our everyday life. At Lendlease, we understand the challenges and the opportunities, and are in the process of enacting a new strategy for our core retail fund to ensure our retail assets adapt and thrive.
Driving our strategy is the emergence of new technologies. Technology and globalisation have dismantled geographic and economic borders, and blurred those boundaries between the physical, digital and biological worlds. It’s given consumers unprecedented levels of choice.
With a rapidly ageing population, Millennials (those born between 1981 and 1996) and Gen Z (born in 1997 to 2010) are rising to become the dominant workforce and therefore, the key consumer segments. These groups are more purposeful in the way they shop, they have a global mindset and value convenience and experience over products.
Another factor driving Lendlease’s strategy is the projection that by 2050, 68% of the world’s population will be living in urban areas. As population density increases, so will the demand for infrastructure, housing and local employment. This will all create opportunities for further growth in retail expenditure.
Lendlease’s retail fund strategy
In this rapidly changing environment, Lendlease’s core retail fund – the Australian Prime Property Fund Retail (APPF) – is enacting a strategy to evolve traditional shopping centres into a new breed of centres we call “Urban Growth Centres”. These centres will allow people to live, work and play within walking distance, and will be activated throughout the day and night. They will include new elements of mixed-use that will replace or enhance parts of the traditional retail offer, thereby creating new anchors that enhance connection with the community and increase the resilience of the underlying retail offer.
Our priority will be on dominant assets that are conveniently located, close to key infrastructure and services, and where there are future development opportunities around mixed-use.
APPF Retail will also focus on centres that are environmentally and socially conscious as this is what our future generation of consumers will demand. We have a stellar track record in this area, with GRESB recently ranking the fund global first in the retail sector (across listed and unlisted funds) and fifth overall. GRESB is the global real estate benchmark for environmental, social and governance performance.
We have also commenced long-term masterplanning for our shopping centres, to evolve these assets into Urban Growth Centres and capitalise on new development opportunities over an extended timeframe. The masterplanning process for each centre will consider the needs of their local communities, seek to further integrate these assets into the surrounding areas, create a new breed of anchors and cater to consumers’ 24/7 lifestyles.
As a recognised global leader in creating world-class mixed-use projects, Lendlease has the experience and track record to successfully deliver on our vision and strategy, from Darling Square in Sydney, Euston Station in London, Google in San Francisco to Paya Lebar Quarter in Singapore.
Future urban growth centres
The Lendlease managed Macarthur Square is a good example of this strategy in action. Located in a rapidly growing community in South West Sydney, the centre has all the right ingredients to become an Urban Growth Centre.
According to Campbelltown Council, the Campbelltown-Macarthur region will be home to an additional 800,000 people within the next 25 years. The area is Sydney’s southern gateway, acting as a city centre for the Southern Highlands and the Illawarra, and will be situated between Sydney’s two international airports at Mascot and the future, Badgerys Creek airport.
The centre is also located on the doorstep of Macarthur train station, and is nestled between Western Sydney University, TAFE NSW Campbelltown Campus and Campbelltown Hospital.
Lendlease is developing a masterplan for Macarthur Square that will capitalise on its close proximity to the local education and health precincts, and important infrastructure.
We are already working with Council and other local stakeholders to ensure the Macarthur Square Urban Growth Centre fits with broader growth strategies for the region.
Like Macarthur Square, Sunshine Plaza is also located in an area experiencing strong population growth – the Sunshine Coast. The region’s population is projected to increase by 2% per annum, compared to the national rate of 1.4%.
Its tourism market is also growing, with more than 13.6 million tourists visiting the area last financial year.
To service visitors and the growing population, the local Council has proposed an integrated public transport system, including rapid bus transit and light rail.
All these factors point to excellent potential for Sunshine Plaza to become an Urban Growth Centre that would address the needs of the Sunshine Coast.
The year ahead
Bricks-and-mortar retail in Australia have strong foundations that will continue to bolster the sector in the long term. Physical stores still capture approximately 90% of retail spend and increasingly, pure online retailers are launching physical stores to deliver a seamless omni-channel experience to their customers.
Consumers, however, remain cautious with their spending in an environment of low wage growth and high underemployment. Households are also having to contend with relatively strong price growth in non-retail services such as healthcare, education, utilities and rent. This leaves less dollars for households to spend on traditional retail stores.
We also expect to see the recent bushfires and the coronavirus outbreak to negatively impact retail sales in the short term.
Population growth will continue to be the key driver for retail spending, as we have seen occur in Victoria where retail sales grew by 4.8% as at June 2019.
Balancing all these factors, our forecast is for retail sales to grow at a similar rate to what we have seen during the past few years.
In this environment, retail stores that adapt quickly and engage with customers on multiple levels and across channels will continue to succeed. There are some great examples of this in the athleisure, lifestyle and wellness, and cosmetics categories.
Most retail landlords will continue evolving the retail mix in their assets, with a focus on food and beverage, entertainment, health and wellness and experience.
While the outlook for retail in the short term continues to be challenging, the sector’s strong foundations will help it weather the global changes. But for players in the sector to continue to succeed, they need to look at new ways of operating. For Lendlease’s APPF Retail, we’re focused on evolving our shopping centres into urban growth centres to ensure they thrive and continue to meet the needs of our communities.
About Lendlease Retail
With more than 40 years’ expertise in constructing, developing and managing Australian retail shopping precincts, Lendlease delivers high-quality customer experiences. Through our national A$4.8 billion-plus portfolio of retail assets, our retail division delivers integrated services including retail development, design and construction, urban regeneration, masterplanning, leasing, marketing and asset management.
We manage 15 high quality retail shopping precincts in urban and regional areas. With customer experience at the core of everything we do, our team of professionals strives to consistently exceed expectations and foster lasting connections between retailers, brands and the millions of customers visiting our retail places annually.
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