Dec 06 2016
Over the last couple of years, many major shopping centres have been undergoing huge makeovers and renovations to attract more patrons. As the shopping centre operators industry is currently in the mature phase of its economic life cycle, these redevelopments have aimed to stimulate revenue growth. Revenue for this industry has fluctuated over the past five years, but is expected to grow at a subdued 2.6% in 2016-17. Scentre Group and Vicinity Centres are the largest shopping centre operators in Australia, and both companies have been consistently expanding, renovating and rearranging their tenancy mix to remain competitive with online shopping sites, local shops and other shopping centre operators. These redevelopments have involved introducing new international retailers, new food, personal shopper experiences and new technology.
Scentre Group, the operator of Westfield branded shopping centres, was formed through the merger of Westfield Retail Trust and Westfield Group’s Management business. Scentre Group has expanded its network of shopping centres and undergone several renovations at its existing centres. This includes the redevelopment of Westfield Chatswood, which has included 40 new stores, an Asian dining precinct and a marketplace concept that will open beyond traditional working hours. The redevelopment aims to cater to the area’s diverse community. Westfield Chermside, Brisbane’s largest shopping centre, is currently under redevelopment and will have up to 95 more retailers, a gallery mall and an entertainment area in its new centre. Other Scentre Group redevelopments include a $400 million redevelopment of Westfield Garden City in Mt Gravatt, Brisbane, and a $435 million redevelopment of Westfield Miranda in Sydney. In 2015 and 2016, the group redeveloped shopping centres in Hurstville (Sydney), Kotara (Newcastle), Casey (Melbourne), Warringah (Sydney) and North Lakes (Brisbane), costing $830 million. In addition, the company has a further $3.0 billion worth of developments planned. IBISWorld expects these initiatives to drive revenue growth of 4.8% for the year ending December 2016, outpacing the industry’s growth over the same period.
Vicinity Centres was established when Novion Property Group merged with Federation Centres, becoming one of Australia’s leading real estate investment trusts. Vicinity Centres’ portfolio includes Chadstone Shopping Centre, Emporium in Melbourne, Direct Factory Outlets, The Glen in Melbourne, Queens Plaza in Brisbane and Chatswood Chase in Sydney. Vicinity Centres’ revenue is expected to grow at an annualised 21.3% over five years through 2016-17, due to its merger activity and the strong performance of its shopping centres. Its operations have benefited from the redevelopment of centres such as Eastland, which recently underwent a $655 million redevelopment and added an extra 80 shops. In addition, Chadstone Shopping Centre, Australia’s largest shopping centre, recently underwent a $660 million redevelopment that includes 100 new stores, increasing the presence of luxury retailers, trendy dining options, a premium Hoyts cinema and a Lego Discovery Centre. The company also plans to redevelop The Glen in Melbourne, which will cost $500 million.
Ultimately, shopping centre operators invest significant amounts in redeveloping their prime centres to sustain a constant flow of patrons. These shopping centre redevelopments have involved leases being changed and rearranged. Traditional anchor tenants such as department stores and supermarkets, which were previously relied on to draw in customers, have been superseded by international fast fashion retailers such Zara, H&M and Topshop. Shopping centre operators have successfully boosted revenue through major renovations and by positioning their centres as lifestyle destinations offering retail, entertainment, relaxation and leisure activities.