The pandemic may have accelerated online shopping usage, but the eCommerce market has shown no signs of slowing down, with projected sales to reach $43.21 billion in 2023 in Australia, up from $37.44 billion in 2022, which has led to large retailers such as David Jones reducing their store size.
Annual online spending per shopper in Australia on average is forecasted to be $2,704 in 2023, up from $2,457 last year, according to Statista. Additionally, one in six of all shopping experiences in Australia was online this year.
In answer to less foot traffic and eCommerce ruling retail, large-scale retailers like Myer are moving out of shopping centres like Westfield Knox, which has led to shopping centre companies like Scentre, redesigning centres. In this case the Knox is nearing completion on a $355 million refurbishment.
Scentre has said that many of their businesses are moving towards “experience-based offerings,” such as dining, entertainment, health and beauty, which previously was at around 44% of its tenants but that number is growing.
Starting in 2025, David Jones relinquished one of the floors it occupies at Westfield Bondi Junction in an effort to consolidate its square footage. The silver lining is an opportunity to find new ways of enticing shoppers.
Scentre’s group director of customer, community and destination, Lillian Fadel says there are some positives that stem from a lower demand for space from department stores, there is chance to create a new shopping experience while using the existing current footprint. Also smaller stores pay more in rent.
“What department stores normally pay is significantly lower than a lot of mini-majors or specialty,” says Lillian Fadel.
Fadel is well equipped to speak on the challenges that the country’s shopping centre landlords must overcome by being agile.
She is leading the redesign of Westfield malls and is working on reconfiguring them into something more than standard shops by bringing in luxury brands, others have found success with gyms, and medical and cosmetic clinics.
“From a customer perspective, it’s been very well received,” Fadel says.
Shops that offer services, like massage parlours, cosmetics and laser clinics, tattoo parlours even, are also on the rise as being added to malls.
Saruchi Khattar, 42, is the owner of Celebrity Ink, has said of her store being in a mall: “The idea behind it is the tattoo industry has a certain kind of perception, and it’s not that inviting. But if you have it in a shopping centre, it makes it more inviting and people view tattoos as a fashion statement and way of telling stories instead of previous connotations.”
For some, it could be just an adjustment of mindsets of what malls can be.
Lou Pirenc, the head of real estate research at Jarden said that we had to rethink “about what the mall should look like” after the pandemic.
“What happened was a remixing. More daily needs, more services,” he says.
Restaurants are also becoming more prominent in malls, but instead of takaway options, now there are larger scale restaurants being added to malls.
Michael O’Brien, QIC’s managing director, said: “The dynamic has changed quite significantly, and department stores are no longer viewed as destinations. We’re seeing very strong performance from the mini-majors, so we’re effectively able to release some of that beatbox space that’s no longer required by department stores.”
At QIC’s Blacktown Westpoint, when Myer left two levels of the centre, new smaller tenants moved in, like Cotton On, JB Hi-Fi and Uniqlo.
By adding experiences and services, QIC wants shoppers to think of its malls more like town centres, O’Brien says, which in turn can protect Australian assets better than how the U.S. is managing.
Many of the shopping centres in the States are struggling with malls like the Crystall Mall in Connecticut, valued at $US153 million in 2012, being sold at a foreclosure auction this year for $US9.5 million ($14.4 million).
Worse, malls are said to now be worth 70% less than in 2016, according to Green Street, a research firm.
Whereas some of Australia’s main retail portfolio values have steadied in the past year, still it’s a challenging market with even Scentre property values falling 0.6% in its last financial year.
However, changing shopper demographics could change everything, says Hamilton Property Consultants, a retail advisory group.
“If the younger shoppers continue to shop online as they grow older the proportion of supermarket shopping conducted online would be expected to increase, resulting in reduced foot traffic in shopping centres,” the analysts wrote in a note.
According to Pirenc, smaller malls have proved to be the most resistant to downturns.
“You haven’t seen as much of a change because the neighbourhood centre was already focused on daily needs and services related,” says Jarden’s Pirenc.
“They traded really well because they were offering essential services, and they’re even closer to where people live and therefore have seen less change.”
Because of this, neighbourhood centres continue to remain coveted investments, says Rob Ellis of PAR Group, a research firm specialising in real estate.
