With the rise of mixed-use town centres comes a new focus on social retail – incorporating community services, entertainment, fresh food and an engaging shopping experience – which will increasingly shape the retail centres of the future.
The good news for tenants and landlords is that a focus on creating these experiences, to take advantage of a new currency we call the ‘social dollar’, stacks up from a bottom-line perspective.
A leasing strategy focused on sociability, implemented on a broader scale within greenfield town centres, is a natural response to the driving force behind the emergence of these mixed-use projects: housing affordability.
Affordability pressure has seen people move away from CBDs to the rural fringes of our major capitals. In 2016, only 23 postcodes in Melbourne still offered affordable median house prices, most being at least 20 kilometres from the CBD* – and Melbourne is considered more affordable than Sydney.
It’s a well-recognised trend that places a greater role on the neighbourhood shopping centre to serve as a place where communities interact and socialise. In this way, the emergence of more town-centre projects is changing the nature of shopping centres.
It’s also changing the landscape for specific retail sectors in the process.
For instance, neighbourhood or super neighbourhood centres integrated with mixed-use town-centre developments will likely have a lower quantum of fashion specialties.
A typical sub-regional centre today incorporates about 25% fashion specialty retailers. In the future super-neighbourhood centres, those designed specifically to serve new town centres, we see this proportion being closer to 10%.
Taking the example of a 400m2 tenancy in a neighbourhood centre, our experience tells us a food-and-beverage operator could attract – conservatively – three times the turnover that a fashion retailer would generate in its place.
Landlords therefore have no need to offer retailer-friendly deals to fulfil a certain fashion quota. And though the proportion of fashion retailers may decline, the fashion shops in these centres will enjoy less competition.
While an emerging retail leasing focus on sociability may have moved the goalposts for fashion retail, it has signalled the rejuvenation of another sector which at one stage might have seemed doomed.
A decade ago, cinema operators would not have considered setting up in anything less than a big sub-regional centre. This naturally limited expansion opportunities. Then the onset of online gaming, streaming services and even piracy posed new threats.
Neighbourhood centres have not only provided a lifeline for the cinema sector, they have revitalised it. Demand for cinema tenancies in town-centre style developments is spiking.
At Edmondson Park in Sydney’s west, the cinema tenancy is a hot commodity. Numerous operators are circling and their intentions are genuine.
Super-neighbourhood centres can comfortably focus on the social dollar and not sacrifice the bottom line in doing so. Asset values and rentals can not only be protected by providing a retail environment that encourages social interaction, delivers a memorable experience and contributes to a cohesive community. They can be enhanced.
It puts a new onus on the role of developers. Expect to see financial, medical and Government services, in the forms of council offices, childcare, gyms and wellbeing centres, woven into the neighbourhood shopping centre fabric.
The provision of educational experiences will increase. Places of worship may be integrated too. Flexible retail spaces that accommodate short-term on-trend pop-up offers that generate spikes in footfall have an important role to play.
But does integrating a childcare centre into the tenant mix mean accepting a lower per-sqm rental, given the larger space demands?
Not necessarily. And in the long term, if it reinforces the centre’s position as a community focal point, it can drive improved capital appreciation. If the neighbourhood centre is to play a meaningful role in a mixed-use context, social services like childcare centres are a necessity.
Time-poor local residents will increasingly demand a social retail mix. New town centres can become a social hub where residents, perhaps distanced from their extended families and networks, can thrive in an all-encompassing work, rest and play environment.
Importantly, these spaces should feel small enough to be familiar and easy to navigate, but large enough to still excite. Each must reflect its surrounding community, creating memorable places that break the mould of cookie-cutter centres which often fail to address the needs and desires of these new communities.
As the retail mix of tomorrow’s town centre focuses on the social dollar, retail – the new, social retail – no longer takes a back seat to residential in mixed-use developments.
On the contrary, the right retail mix can drive residential sales. As more and more people embrace apartment living and density around transport nodes, in new mixed-use town centres on the outskirts of our capitals, access to social retail provides the lifestyle balance that makes this type of living preferable.
- Tim Moore
*Based on Domain Group house price data versus average loan size from the Australian Bureau of Statistics.