Retail rents falling for discount department stores
Rents collected for discount department stores in subregional malls have fallen while those for specialty stores in smaller neighbourhood centres are rising, according to a Savills report.
The National Retail Quarter Time report is a barometer of how the retail property sector is faring as it weathers cyclical and structural challenges, especially the turn towards e-commerce.
The report found that supermarket rents across all centre types remained stable. For discount department stores in subregional centres rents fell 3.9 per cent to an average of $235 per square metre over during the 12-month period to March.
“Interestingly, the average went down as a result of downward revisions to the high end of the range, rather than the low, in a reflection of the times,” said Savills research director Shrabastee Mallik.
“We are now at a stage of the cycle where landlords are carefully considering the levels at which they pitch their rents.
“With many of these discount department stores coming under increasing scrutiny about their low prices coming at the cost of ethics and sustainability, we are probably going to see more of these retailers negotiate their leases in their favour, as the pendulum remains firmly in favour of tenants.”
It was a different story in neighbourhood centres where specialty tenant rents rose 8.3 per cent in the 12-month period to March this year.
Specialty tenant rents across regional and sub-regional centres fell in the same period.
“As people become busier, there is a greater demand for neighbourhood centres to be a one-stop shop, with more and more local neighbourhood centres providing a streamlined non-discretionary experience,” said Savills national head for retail investments, Ben Parkinson.
A total of $8.8 billion worth of malls, each worth $5 million or more, were sold in the 12 months to March, across 220 deals.
Among the recent deals, Singapore’s SPH REIT joined with Moelis Australia to buy the Figtree Grove shopping centre in Wollongong in a $206 million deal from Blackstone last December.
In Victoria, QIC Global Real Estate bought 50 per cent stakes in the Alter family’s Werribee Plaza and Pacific Epping shopping centres in a deal worth close to $1 billion in June last year.
