Retail experts say shopping centres aren’t a thing of the past, but COVID has changed the way we shop

 In Home News Section, Uncategorized

There is little doubt the COVID-19 pandemic has changed shopping habits, but retail experts say it is the acceleration of an existing trend rather than a major shift in the market.

Shopping centres have made news throughout the pandemic, and in this case, all publicity is not good publicity.

Malls, supermarkets and retailers have been listed as exposure sites during outbreaks and have even been at the centre of clusters such as one in Sydney’s Bondi.

It seems shoppers have fairly short memories, however, with the recent company reporting season revealing a recovery for shopping centre operators during periods of eased restrictions.

How did the pandemic affect shopping?

From panic buying and hoarding to forced click-and-collect, the impact of COVID has been clearly evident in how retailers performed over the past year.

JB Hi-Fi benefited from people working and entertaining themselves at home, while online furniture retailer Temple & Webster saw its revenue rise as people upgraded their interiors.

“The main shift we’ve seen is this monumental shift to online,” said Jana Bowden, an associate professor of marketing at Macquarie University.

Supermarket sales rose, particularly online, as people stocked up on essentials.

There has also been a move to shopping locally, particularly during outbreaks, and the popularity of neighbourhood strips and supermarkets meant some grocery retailers outperformed others.

Coles has more stores in shopping centres than its competitors and chief executive Steven Cain said that meant easing restrictions and increased vaccination would “create a level playing field again”.

Other retail sectors, such as clothing, were hit hard during last year’s initial lockdowns, but recently staged a recovery.

Mosaic Brands, the owner of Noni B, Rivers and Katies, returned to profit from last year’s loss after closing more than 200 stores and growing its online sales despite catering to the over-50s demographic.

Shopping centres themselves have also posted a recovery after suffering through falls in foot traffic and store closures — some temporary, some permanent.

The head of real estate equities research at Jefferies, Sholto Maconochie, was closely watching how the real estate investment trusts (REITs) — many of which have retail properties in their portfolios — performed during reporting season.

He described it as a “tale of two halves”, with the start of the 2021 financial year more impacted by COVID restrictions and the second half seeing a recovery as restrictions eased and outbreaks became sporadic.

“A lot of the REITs pretty much all saw foot traffic and sales back to or above pre-COVID levels,” Mr Maconochie said.

One thing that remained weaker were rents — Mr Maconochie said new rents charged to tenants were around 10 per cent below old rents, but that was still an improvement from the depths of the pandemic.

Despite threats of store closures from some major retail groups last year, Mr Maconochie said occupancy remained at around 98 per cent across most centres, something that was “unheard of compared to global malls”.

However, he noted occupancy rates were masking the fact that some leases were in a “hold over” phase, similar to a “month-to-month” arrangement.

Have shopping habits changed permanently?

The recovery experienced by some of the hardest-hit retailers and centres when lockdowns ended and restrictions eased suggested shoppers had short memories about any reluctance to visit retail stores.

But Dr Bowden said the online shopping shift would not be reversed post-pandemic, citing research that shows eight in 10 Australian households now do some of their shopping online and many expect to continue the habit.

“49 per cent of consumers globally say they’re not going to stop, and shop online more than pre-pandemic,” she said.

In the short term, she forecast some lingering consumer reluctance around high-density centres due to virus fears, but in the longer term, it is the convenience factor that is likely to keep people online.

“Behaviours can be sticky,” agreed Mr Maconochie.

However, he said he expected a similar, if somewhat smaller, recovery to that seen over the past financial year when the current lockdowns in New South Wales, Victoria and the ACT ease.

“I think people will get back to their norm … people do like to get out of the house.”

Some shopping centre owners are hedging their bets between bricks-and-mortar retail and online sales.

Stockland boss Tarun Gupta said it was the acceleration of a trend that was underway even before the pandemic.

“There’s a while to go in terms of e-commerce and customers getting more comfortable across the various demographics interacting and buying products online,” Mr Gupta said.

“That’s why in our portfolio, we have… quite a large logistics land bank, which we’ll be using to provide those distribution channels as consumer habits shift.”

What will the shops and malls of the future look like?

With some of the changes to shopping behaviour likely here to stay even once the pandemic subsides, it may mean some significant changes to the way shopping centres and retail stores look and operate.

Francis Loughran founded Future Food, which consults on the development of food precincts, including the dining areas in malls.

He said the major shopping centres were already shifting away from traditional retail towards becoming “mixed-used developments”, so the pandemic was unlikely to derail their future plans.

“‘Mixed-use development’ just says that shopping is only part of the total experience,” he said.

Examples of mixed-use developments include apartment towers over centres, and council facilities like libraries, exhibition spaces, childcare centres and gyms being integrated into shopping centres.

“The larger [shopping centres], we control a lot of land around them,” Mr Gupta said.

“The long-term evolution as we’re thinking about some of those assets is how they can be enhanced by putting in some more mixed uses as part of being vibrant town centres.”

In the last 15 years, Mr Loughran has witnessed a shift from a “product-based delivery” model to centres incorporating external dining spaces, food halls and entertainment precincts.

“The growth in food and hospitality is huge. It’s a major part of the asset development,” he said, noting that food and beverage had gone from around 2-4 per cent of the leasable area of centres to around 4-6 per cent in Sydney and Melbourne, and as high as 30 per cent in overseas markets such as the Middle East.

As some traditional outlets, like fashion stores, reduce the number of physical stores, Mr Loughran said he expected new types of tenants to be waiting in the wings to occupy shopping centre real estate.

“Dark kitchens are basically set up so that their kitchens operate serving various menus, so they could work with [food delivery services] to have five or six cuisines combined in one kitchen,” he said.

“That kitchen could be in a secondary area in a shopping centre. They become a new tenant, they’re paying rent and trading away.”

Mr Maconochie said he thought click-and-collect would become further ingrained in shopping centres, with retailers expecting centres to provide the facilities to make it viable.

“They’re all looking at ways to help their retailers, to make it easier for people to come in, with a concierge service or click-and-collect… and that’s a really good way to help bring people back to the mall and save costs, because it is cheaper to pick it up in-store than send via online.”

For supermarket giant Coles, the future means growing its presence in the smaller-format store space, allowing it to open in inner-city locations and smaller shopping strips.

“Historically, we’d found it difficult to get a full line supermarket into some of these suburbs and so a couple of years ago, we started Coles Local as an experiment to see if we could make a smaller supermarket work,” Mr Cain said.

But he is not writing off the big stores in shopping malls just yet.

“I’m confident that there is a strong future for shopping centres, as well as local stores here in Australia.”

By business reporter Stephanie Chalmers (Original ABC Article)