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Close to home: Virus breathes new life into local shopping centres

InQueensland has partnered with industry leader JLL to bring you regular news, analysis and research about Queensland’s commercial property market. Today’s insights show that the pandemic has, breathed new vigour into local centres as shoppers stay close to home.

Aug 26, 2020, updated Sep 07, 2020
Heidi Fin on Unsplash

Heidi Fin on Unsplash

The effect has been startling, especially for certain anchor tenants. Supermarket trade growth jumped 23 per cent in March as households stocked up, followed by an 18 percent decline in April. Monthly sales growth moderated in May (up 5 percent), and remains 10 percent higher than supermarket spend in May 2019.

Many neighbourhood and sub-regional centres managed by JLL recorded foot traffic higher than in the pre-COVID-19 period, with food and healthcare services a strong attraction.

In Brisbane, we witnessed some foot traffic increase with visitors frequenting convenience centres.

“The addition of new fresh food retailers in some of the centres we manage has greatly contributed to essential shopping for locals,” says JLL Head of Retail Management- Queensland, Shane McCann.

“The addition of essential retailers contributes to the strong supermarket offer throughout COVID-19 affected months.”

JLL’s Joint Head of Retail Investments – Australia, Jacob Swan, says the results are likely to be sustained into 2021, with investors showing keen interest in neighbourhood and sub-regional assets, primarily those under $150 million. Private investors and syndicates are the traditional players in this sector, but JLL is now seeing a push by offshore investors attracted by the strong performance of supermarkets.

“We are seeing people continue to work from home and stay in their suburbs,” says Mr Swan. “The option of shopping in town when you go to work is no longer there, so people are spending their money locally.

“With the perceived health challenges, the idea of mingling with lots of people in big retail centres has turned some shoppers to other options. In a neighbourhood centre with a supermarket, you can do what you need to do in less time.”

Income was less resilient in regional and CBD centres in April, following lockdown restrictions. The increase in foot traffic in the second half of May suggests people felt more confident about heading back out.

Anecdotally, some local shopping centre portfolios collected up to 85 per cent of rents in April and May, with the outstanding amount to be collected by deferral or waived under legislation aimed at helping struggling retailers.

Looking ahead, Mr Swan expects these local centres to thrive through a resilient mixture of specialty tenants such as food, medical and allied health. “The expansion of health services has always been a factor but is far more heavily emphasised now. I think we will continue to see these tenants feature prominently,” he says.

This article was produced as part of JLL’s Real Estate Review H1 2020 edition, which is now available.

Click here to register and read the full Queensland edition.

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