The market keeps growing
Back in 1998, total Australian retail expenditure was about $121 billion with online spending capturing just $1 billion. In 2018, the Australian retail expenditure has risen to an estimated $317 billion with online sales taking $26 billion of that total. The overall retail market in Australia has grown historically, driven by population growth and spending per capita capacity, a view that Dexus Research sees continuing. What is likely to shift is the rate of physical store sales growth from an average annual run rate of about 4.5% to a slower growth rate of 3.4% per annum.
With a backdrop of growth in the Australian retail market, possible headwinds to monitor in 2019 will be the impacts of any further Residential slowdown and any decline in Consumer and Business Confidence.
Melbourne and Sydney will be two housing markets to watch closely with falling house prices and tighter lending conditions possibly impacting supply and demand. Consumers will continue to be constrained by weak wages growth and high levels of household debt. The Federal and NSW state elections could also further impact Consumer and Business Confidence throughout the year as major policy positions become evident.
Experience-led economy
To combat the current retail and market landscape, Dexus is driving forward with an experience-led retail economy, providing shoppers with ongoing reasons to visit our retail destinations. The role of the shopping centre continues to evolve and with this comes how we view centre classifications. In the past, we have managed our assets through the lens of convenience, sub regional and regional-based asset classifications. Today our view is different with retail environments offering more than ever before. Dexus defines the role of our portfolio construction as:
• Dominant Lifestyle Centres – The best product and the best experiences
• Community Destinations – Places to live, work and play
• Cities – Highly connected precincts
• Convenience – Very accessible and efficient.
These new classifications allow us to strategically maximise opportunities and deliver strong outcomes for all stakeholders.
Investing in Retail today requires a critical analysis of key success drivers for individual assets and some tough decisions around portfolio construction. Dexus continues to pivot its portfolio to focus more on food, leisure, services and experiences.
Leading cities
Dexus’s investment into leading city retail precincts is not about being the biggest and the best. Delivering the relevant retail amenity and experience that activates the ground plane across the quality Dexus office platform is a key objective. This in turn drives significant investment value upside to the overall office property.
Gateway Sydney, at Circular Quay, is an example of delivering 25 quality dining options from fast, casual to slow food and filling a much-needed gap in the market. The stabilisation of the retail precinct has generated more than $75 million in retail sales and added to the overall valuation of the asset.
The luxury core in the Sydney CBD has undergone a transformation during recent years as more international brands arrive.
Today, the luxury core has expanded from only Castlereagh Street to take in Martin Place, George, King and Pitt Streets. Dexus has strategically located assets across this luxury heart, including the iconic MLC Centre, 5 Martin Place and 175 Pitt Street.
Tiffany & Co. will unveil a new three-storey, 2,275m2 Australian flagship early this year on the prime corner of King and Pitt Streets. The opening of the Tiffany & Co. flagship will transform 175 Pitt, housing luxury retail, commercial spaces and a café.
5 Martin Place, Sydney (co-owned by Cbus Property and Dexus), stamps its authority as a destination showcasing premium iconic brands, housed within a unique historic setting, supported by a quality commercial offering. Beautifully presented retail experiences from Suitsupply, COS, Farage and Rimowa activate the ground plane.
Carillon City in the centre of the Perth CBD presents a unique opportunity for Dexus and the owner Dexus Wholesale Property Fund to reposition the centre into a vibrant retail, dining and entertainment destination for the people of Perth.
The planned transformation of Carillon City will deliver to the Perth CBD a modern, connected retail and leisure experience to further complement the investment that’s underway across the city centre.
Local matters
At Dexus we are focused on driving value by delivering localised experiences.
What’s right for the local Townsville community is not always right for the Melbourne CBD community. Local communities are seeking tailored experiences that showcase the best of their community.
Retail destinations provide the perfect platform to deliver relevant, engaging experiences for people to enjoy and participate. Through our proactive on the ground local management we aim to provide shoppers with a reason to visit and reasons to engage and return.
Across the Dexus diverse retail portfolio, we are witnessing a preference for people to stay local, particularly on weekends.
Destinational food operators are opening outside of major cities and people are looking to avoid heavy traffic, parking fees and toll roads. Many of us live in a socially engaging ‘always on’ world that’s driven by technology and there is a noticeable shift towards shoppers seeking respite in our retail destinations, craving a sense of belonging in a local environment.
Responding to the growing demand for ‘local’, our retail marketing continues to evolve. Experience-led activations that invite the community to participate are proving to drive the best return on investment.
The success of our simple Mothers’ Day activation at Willows Townsville, proves that small, local experiences matter. Shoppers were invited to receive a complimentary professional family portrait with no promotional catch. Over 500 photo sessions were held over three days, resulting in many positive comments across the centre’s social media platforms.
Inviting shoppers to relax and connect continues to attract people to QV Square at QV Melbourne. The recent Australian Open chill out zone was a hit for people to dwell and socialise in a vibrant city precinct. QV’s augmented reality interactive Christmas campaign saw thousands of people participate in a fun, engaging way.
People visit places for experiences and to interact with others. In today’s environment, delivering an engaging community experience is essential in making a place come alive.
Integrated property solutions
Dexus recently formed an integrated $9.8 billion Retail and Industrial division that enhances our ability to unlock global megatrends, address the virtual shopping economy and meet customers’ evolving expectations in an increasingly urbanised and highly-connected world.
By combining Retail and Industrial we can partner with our customers more deeply by offering a fully integrated property experience from ship-to-shop shelf, and supporting them through their entire property journey.
Dexus continues to invest into technology to run the Retail platform more efficiently. Investing into financial systems aims to improve the service experience for our valued retailers and supplier partners. In addition, progressing several solar projects across the portfolio seeks to gain sustainable outcomes, improving productivity.
Our people make us great
Our people are at the foundation of everything we do. Working at Dexus, you never know what kind of challenges and opportunities you’ll be presented with. We offer jobs that will make impressive use of your skills, training and judgment, the kind of career that’s exciting and rewarding.
Our people are the key contributor to our success and we are proud of our employee programs and investment in talent, which makes Dexus a great place to work.
Keeping it simple
Success this year will be down to the capabilities to manage the fundamentals well and deliver good Retail and Industrial asset management outcomes. The right retailer in the right location; a retail destination that is relevant within its market; compelling experiences for shoppers and partnering with retailers to achieve mutually sustainable results.
The Dexus team is focused on delivering an integrated property experience for our valued customers, across the Dexus Retail and Industrial platform.
About Dexus
Dexus is an Australian Real Estate Investment Trust with $28.9 billion of assets under management. Dexus manages and directly invests in high quality Australian office and industrial properties, and actively manages office, industrial, retail and healthcare properties across Australia on behalf of third party capital partners.
As property innovators, we are deeply committed to working with our customers to provide spaces that engage and inspire, as well as delivering quality, sustainable returns for our investors. Delivering to the needs of our customers and the strength and quality of our relationships will always be central to our success.
The physical retail environment remains vitally important in an omnichannel world for its role in delivering an experience, customer service and providing online sales support. This view is based on positive trends in urban densification, the need for community places, growth in the service sector and the value of large centrally located retail assets.
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