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Online Sales Benefit Shopping Centres: Vicinity CEO

The CEO for retail landlord Vicinity Centres has revealed that exorbitant last-mile delivery costs in Australia have resulted in a rise in click-and-collect purchases that benefit shopping centres.

Vicinity Centres CEO Grant Kelley told The Australian Financial Review Property Summit that the rise in click-and-collect sales have forced retailers to rent more floorspace within shopping malls to house additional inventory – a more viable model then shipping goods from outer-city warehouses to customers.

“You know, within Australia, last-mile delivery costs are among the highest in the world. It leads to a click-and-collect model,” he said.

“So online has actually benefited retail landlords because it’s often meant that retailers are taking up more space because they actually need additional inventory to handle the customers who are coming in to collect the goods from their store, or they’re being dispatching from their store.”

Vicinity has trialled micro-processing hubs” that use excess space in loading docks as parcel dispatch centres, launching this model at its Glen Waverley mall in Melbourne.

Kelley pointed to Vicinity’s 99 per cent occupancy rate and 75 per cent tenant retention rate as proof that inflationary pressures haven’t impacted retailers.

“Retailers are seeing sales increasing, and while that continues, for landlords the value proposition around a shopping centre is a strong story,” Kelley said.

CBD malls are struggling, with foot traffic for the June quarter sitting at only 65 per cent of pre-COVID levels. Given this is only a weekday issue, Kelley points to the return of office workers are key to CBD mall recovery.

“CBDs though are the challenge, and they’re a challenge on a Monday to Friday basis.

“Interestingly enough, on weekends, they’re actually pretty much at the same level of throughput as they were pre-COVID.”

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