15 L04 BENVgffas2986 Retail Property Management

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Retail Property Management

BENV2986 Property & Asset Management

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Shopping Centre facts

• At June 2013, 1,267 shopping centres in Australia which exceeded 1,000 m2 of lettable area.

– 91 regional shopping centres

– 313 sub-regional centres

– 840 neighbour or super-market based shopping centres.

• Generate $133.8 billion in retail sales in 2012/13 which was equivalent to 8.6% of Australia’s GDP.

• Shopping centres sales comprised 51% of total retail sales in Australia

• Employ 6.7% of total workforce (10.7% in retailing).

(Sources : Shopping Centre Council of Australia)

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Types of Retail Property

• City Centre

• Neighbourhood (or Convenience) Centre

• Sub-regional (or Community) Centre

• Regional shopping Centre

• Major Regional Centre

• Super Regional Centre

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City Centre

Definition:

• Retail premises within an arcade or mall development owned by one company, firm or person and promoted as an entity within a major Central Business District.

• Total gross lettable area retail (GLA) exceeds 1,000m2.

Key features:

• Dominated by specialty shops

• Likely to have frontage on a mall or major CBD road

• Generally do not include supermarkets

• Often co-exists with large department store

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Neighbourhood Centre

Definition:

• A local shopping centre comprising a supermarket and approximately 35 specialty shops.Total GLA will typically be less than 10,000m2.

Key features:

• typically located in residential areas;

• service immediate residential neighbourhood;

• usually have extended trading hours; and

• cater for basic day-to-day retail needs.

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Sub Regional Centre

Definition:

• A medium-sized shopping centre typically incorporating at least one full line discount department store, a major supermarket and approximately 40 or more specialty shops.Total GLA will typically range between 10,000 and 30,000m2.

Key features:

• provide a broad range of sub regional retail needs; and

• typically dominated by a full line DDS or major supermarket

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Regional Centre

Definition:• A shopping centre typically incorporates one full line department store, a

full line discount department store, one or more supermarkets and approximately 100 specialty shops.

• Total GLA ranges between 30,000 and 50,000m2.

• In some instances, all other characteristics being equal, a centre with two full line discount department stores, without a department store, serves as a regional centre.

Key features:* extensive coverage of a broad range of retail needs (including specialised

retail), however, not as exhaustive as major regional centers;

* contains a combination of full line department stores, full line discount department stores, supermarkets, banks, chain and other specialty retailers

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Major Regional Centre

Definition:• A major shopping centre typically incorporating at least one full line

department store, one or more full line discount department stores, one or more supermarkets and approximately 150 specialty shops.

• Total GLA ranges between 50,000 and 85,000m2.

Key features:• one-stop shopping for all needs;

• extensive coverage of the full range of retail needs (including specialisedretail), containing a combination of full line department stores, full line DDS, supermarkets, services, chain and other specialty retailers;

• typically includes a number of entertainment and leisure attractions such as cinemas, arcade games and soft play centers; and

• provides a broad range of shopper facilities (car parking, food court) and amenities (rest rooms, seating).

• caters for basic day-to-day retail needs

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Super Regional Centre

Definition:• A major shopping centre typically incorporating two full line department

stores, one or more full line discount department stores, two supermarkets and approximately 250 specialty shops.

• Total gross lettable area retail exceeds 85,000m2.

Key features:• One-stop shopping for all needs;

• Comprehensive coverage of the full range of retail needs (including specialised retail) - combination of full line department stores, full line DDS, supermarkets, services, chain Super Regional Centre

• typically includes a number of entertainment and leisure attractions such as cinemas, arcade games and soft play centers; and

• provides a broad range of shopper facilities (car parking, food court) and amenities (rest rooms, seating)

• Often co-exists with large department stores

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Size of Various Components of Shopping Centre

• Major Department Store

– 18,000 ~ 20,000 m2

• Discount Department Store

– About 7,000 m2

• Supermarket

– 1,200 ~ 2,800 m2

• Specialty Shop

– About 100 ~ 150 m2

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Retail Property Hierarchy

COMPOSITION PARKING

BUILDING AREA

Super Regional

2 - Major Department 1(2) - Discount Department2 - Supermarket 250 - Specialty Shops

3,500+ cars

85,000 M2

Major Regional 1(2) - Major Department 1(2) - Discount Department1(2) - Supermarket 150 - Specialty Shops

2,000~ 3,500 cars

50,000~ 85,000 M2

Regional 1 - Major Department 1 - Discount Department 1(2) - Supermarket 100 - Specialty Shops

1,200~ 2,000 cars

30,000~ 50,000 M2

Sub-Regional 1(2) - Discount Department1 - Supermarket 40 - Specialty Shops

400~ 1,200 cars

10,000~ 30,000 M2

Neighbourhood 1 - Supermarket 35 - Specialty Shops

~400 cars

Less than 10,000 M2

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1. Chadstone Shopping Centre, Malvern East VIC: $1.415bil

(167,588m2 GLA)

2. Westfield Bondi Junction, NSW: $1.025bil (127,736m2 GLA)

3. Westfield Sydney, NSW: $950.2mil (167,911m2 GLA)

4. Westfield Fountain Gate, Narre Warren, VIC: $918.2mil

(177,755m2 GLA)

5.Westfield Carindale, QLD: $913.6mil (136,373m2 GLA)

Ranking of Shopping Centres by Annual Turnover(June 2013)

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1. Chadstone Shopping Centre, Malvern East Victoria: 190,000sqm

2. Westfield Fountain Gate, Narre Warren, Vic: 177,715 sqm

3. Westfield Sydney, NSW: 167,911 sqm

4. Westfield, Chermside, QLD: 150,733 sqm

5. Knox City Shopping Centre, Wantirna South, Vic : 142,244sqm

6.Westfield Parramatta, NSW: 137,183 sqm

7.Westfield Carindale, QLD: 136,373 sqm

8.Westfield Marion, Oaklands Park, SA: 133,778sqm

9.Westfield Southland, Cheltenham, Vic: 129,180 sqm

10. Westfield Bondi Junction, NSW: 127,736 sqm

11. Warringah Mall, Brookvale, NSW: 125,372 sqm

12. Robina Town Centre, Robina, QLD: 125,000 sqm

Ranking of Shopping Centres by Size

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1. Scentre Group: 2,497,726 m2 GLA

2. Federation Centres: 2,106,550 m2 GLA

3. Stockland: 920,793 m2 GLA

4. QIC: 884,104 m2 GLA

5.GPT: 795,458 m2 GLA

Five Largest Shopping Centre Owners by GLA(June 2013)

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Shopping Centre Management

Consideration

• Consumer confidence in the region

• Prospect of catchment areas

• Management intensive

• Regular capital improvement required

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Who works in Shopping Centre Management

• Owners such as Westfield (Scentre Group), Stockland, Lendlease, AMP plus high net worth individuals and property companies

• Centre Managers on behalf of owners or external agents

• Operations

• Marketing managers

• Leasing agents

• Admin support

• Customer service

• Security

• Cleaners

• Contractors

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A Standard Retail Business

• 15 - 30%: Cost of goods

(eg: stock/ingredients/packaging etc)

• 20 - 40%: Wage Costs

• 5 - 10%: Incidentals

(eg: advertising, accounts, uniforms etc)

• 10 - 20%: Occupancy Costs

(eg: rent, outgoings etc)

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Design of Shopping Centre

AnchorTenantParking Specialty Shops

Master plan for a continuous program (system) of expansion, upgrading, and refurbishment

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Retail Property Leasing

• Initial letting.– The best possible tenancy MIX.

• Factors affecting tenant selection.– Types of retail demand.

– Overall marketing theme.

– Experience.“Only experienced and existing retailers with proven operation

records need to apply.”

• Subsequent reletting and negotiation.

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Retail Shop Lease

• Base rent

• Percentage of turnover rent

• Recovery of outgoings

• Marketing levy

• Sale of a business or assignment

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Percentage Rent

Assumption:– Base rent: $20,500.

– Percentage gross sale: 6%

– Gross sale (previous year): $560,000.

– Following year sale: $595,600.

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Percentage Rent Calculation

• Estimated turnover rent based on previous yearGross sale x 6% - Base rent= $560,000 x 6% - $20,500= $33,600 - $20,500 = $13,100

• Month turnover rent in advance$13,100 / 12 months= $1,091.67 say $1,090

• The following year turnover rentGross sale x 6% - Base rent= $595,000 x 6% - $20,500= $35,736 - $20,500 = $15,236

• Balance dueDeduct the turnover rent already paid= $15,236 - $1,090 x 12= $15,236 - $13,800 = $2,156

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Other Clauses peculiar to Shopping Centre Lease

• Permitted use.

• Shopping centre rules.

• Conducting of business.

• Merchandising display.

• Insurance.

• Promotional activities.

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Retail Leases Act (1994)

• Retail Shop

– The Act does not apply to retail shops that have a lettable area of 1,000 m2 or more.

• Retail Shopping Centre

– At least 5 of retail shops that are all owned by the same lessor.

• Key Money or Goodwill

– A lessor can not ask for any payment or benefit in connection with the granting, renewal, extension or assignment of a retail shop lease.

• Recovery of outgoings

– A lessor must provide the lessee with an annual estimate of outgoings at least 1 month before the start of the period.

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Retail Leases Act (1994)

• Term of a Retail Shop Lease

– Minimum term of 5 years including options (3 years plus 2 option).

• Registering a Retail Shop Lease

– Registration of retail shop lease for terms of more than 3 years.

• Rent review

– No ratchet clause.

– No whichever of two or more method gives the higher results.

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Promotional Management

• Shopping centre management differs in promotional management.

• Determine the aim of the campaign and budget available.

– A committee with representatives from the tenants and owner administers promotional fund.

• Key areas:

– Tenancy mix and retaining customers.

• Gauging promotional campaign results (cost benefit analysis).

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• Demographics of population in trade area

• Occupations

• Industry of Employment

• Family characteristics

• Competitor Analysis

• Centres within 5 - 10 km radius

• Impact

• GLAR (gross lettable area retail)

• Sales MAT (moving annual total)

• Traffic MAT

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Market Profile

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Marketing Plan

Overview

• Location details of centre

• Aims of marketing plan e.g. to increase the centers profile within the community along with increasing sales and traffic.

Marketing Objective

• Measurable financial goals and objectives have been established to be achieved by 30 June 2015:

• Increase total comparable sales to $51,797,767 MAT comprising:– $44,550,577 Majors Sales ($11,405 psqm; benchmark is $10,872 psqm)

– $7,247,190 Specialty Sales

• Increase total MAT foot traffic by 4%

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Forms of Promotion

• Letter box drop.– Immediate vicinity of the centre.

• Local press.– Professional preparation.

• Radio.– For a particular campaign.

• Television.– Most expensive, major campaign, opening.

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Special Promotion

• Aim.

– Generate attendance.

• Discounting, competition and other generating activities.

• Refurbishment and annual campaign.

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Types of Refurbishment

A marketing and business development exercise aimed at generating additional rental income from the property.

• Renovating. (Interior design)

• Revitalising. (Theme)

• Improving. (Space planning)

• Re-positioning. (Competitive positioning)

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Types of Refurbishment

A. CompetitivePositioning

B. SpacePlanning C. Theme

D. InteriorDesign

Repositioning

Improving

Revitalising

Renovating

Total Retail Concept – Market Driven

Maintenance Driven

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Readings

• The State of NSW (2005) ‘NSW Retail Tenant’s Guide’, Department of State and Regional Development

• Preston Rowe Paterson (PRP) (2011) ‘Property Market Report – Sydney Retail Market’.

• Dubai Luxury Mega Mall (https://www.youtube.co

m/watch?v=JAI7tveh02w)