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Australia’s retail sector is bound for a revival, according to a new report, with new store openings in the pipeline amid expectations that brick-and-mortar outlets will see a resurgence in demand.
CBRE’s Retail Flash Survey revealed that 83 per cent of polled Australian retailers plan to expand their market footprint by opening up more store locations in 2023.
Kate Bailey, CBRE’s head of retail research in Australia, said that positivity is returning to the sector despite lingering headwinds.
“While cost inflation will present ongoing challenges, given lingering labour shortages and higher operational costs, expansion is top of mind for retailers, with 61 per cent of the survey respondents planning to improve their store locations,” she said.
The findings of the report showed there is strong retailer confidence in brick-and-mortar retail outlets, with 58 per cent of respondents planning to boost their number of stand-alone stores.
“One-third of the retailers we polled also plans to increase the size of their store footprints to build more experiential elements into their stores and capitalise on the easing in rents that occurred over the past three years,” Ms Bailey noted.
The great e-commerce boom, which was driven in part by the pandemic, is also expected to wind down, with 58 per cent of retailers anticipating that a portion of online sales will return to brick-and-mortar retail.
“Just 11 per cent of the respondents said they would increase their number of click-and-collect outlets, while 28 per cent said they would increase the number of pop-up and in-store concessions, which suggests that retailers are confident in the future of traditional retail outlets,” Ms Bailey said.
With 89 per cent of surveyed retailers believing that workers returning to offices will have a positive impact on the central business district (CBD) retail sector, data also showed that 58 per cent of operators in the sector are optimistic that sales performance will improve in 2023.
To keep up with the forecasted demand, 50 per cent of retailers surveyed intend to open in CBDs. The report also noted the growing interest in secondary retail in city centres.
On one hand, caution still lingers among 6 per cent of the survey respondents, who revealed they are planning to decrease their network size.
In 2023, one of the top three strategies for commercial real estate portfolios involves renegotiations or restructuring amid increasing demand for “force majeure clauses” in the wake of the pandemic and a shift to a turnover model in what the report deemed to be “still a tenant-favoured market”.
With construction costs currently at a record high, all respondents reported an increase in fit-out costs compared to the period immediately before the onset of the pandemic.
While this is expected to moderate in 2023, costs are expected to remain elevated, with 79 per cent of retailers believing business operating costs will continue to rise, which the report predicted will have an effect on some retailers’ expansion plans.
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