The Retail Landscape Looking Forward

LEAVING ASIDE the effect of Covid has had on the general economy, the consequent drop in population growth and immigration will have a lasting impact upon …

  • Retail floorspace,
  • Retail sales levels,
  • Retail growth, and
  • Growth opportunities for retailers.

As such, retail sales and rental growth will slow over the next 10 years. And moreover, fewer new stores will be opening.

According to the government’s latest Intergenerational Report in June, Australia’s population is expected to grow to 38.8 million by 2060-61.

This is about 3 million fewer than previous estimates – entirely due to the drop in net migration. And it will adversely affect demand for retail floorspace.

Apparently, there is a rough rule of thumb that we need 2 m² of retail space per person. That means, with 3 million fewer people, we will require 6,000,000 m² less retail floorspace.

To put that into perspective … it would represent about 40 Chadstone shopping centres not being built (or required) going forward.

Bottom Line: Most retail landlords should expect only modest rental growth over the next decade or so – with established food and service-based tenancies perhaps being the only exceptions.

However, even supermarkets and convenience outlets are having to rethink their store sizes, following the fall in immigration and the surge in online sales.

Interesting times ahead!

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