Tightened yield rate expected for Mackay commercial centres

‘Even before COVID, retail was going through a transformation. The only thing that COVID did was push fast forward on that.’

Mackay CBD at the intersection of Wood St and Victoria St taken on September 1, 2018

BRICKS-and-mortar retail centres were already experiencing turnover fall and reduced foot traffic as online trading ramped up.

Then the pandemic arrived and outlets were pretty much told to shut up shop.

Real Investment Analytics managing director Anthony De Francesco, who specialises in commercial property metrics and analysis, said innovation and adaptation could prevail in a time of uncertainty.

He said while some had called the pandemic a retail destroyer, his perspective was more positive.

"Even before COVID, retail was going through a transformation. The only thing that COVID did was push fast forward on that," he said.

Mr De Francesco said shopping centres as a concept began in earnest in the 1970s and had been evolving ever since, from the addition of cinemas and entertainment in the 1980s through to food courts and specialist eateries in the 1990s and early 2000s.

But he said the latest challenges would require an even more strategic approach from centre owners; key among them will be adapting tenancy mix and design to meet the needs of catchment-area demographics and the local community.

Mr De Francesco said the public should see a new type of centre emerge as a result.

"A retail centre that's no longer strictly just a 'shopping centre'. It becomes a hybrid product, or a quasi-retail shopping centre," he said.

"There'll be shopping centres which will have a massive bolt-on (outlets) not just in terms of one or two tenants, but a whole new sector which will sit alongside it.

"So, for example, say we've got more retirees in a catchment - like retirement homes and aged care facilities building up around our shopping centre. How should we accommodate them?

"Well, you're going to have a retail shopping centre that's a hub for health services where you've got a physio, a dentist, an x-ray facility and other specialty services.

"Similarly, if you're in a young family demographic and you're providing services to a mum with two kids, she wants to have educational facilities in that shopping centre.

"She wants to have maybe a gym she can go to while the kids go and do an education class too."

Herron Todd White Commercial's September month in review report shows Mackay at the "start of recovery" in the commercial space.

 

Herron Todd White Commercial's national retail property clock

Property valuer Kristie Shorten said the retail sector in Mackay could be categorised into four main sectors: bulky goods retail which was predominantly located at Mount Pleasant and Greenfields; CBD retail; neighbourhood centres; and large shopping centres such as Caneland Central and Mount Pleasant Centre.

"There has been one recent CBD retail lease at a rental of $20,000 per annum gross, which is fairly typical for older retail tenancies which are taken up by small local businesses," she said.

"Higher annual rentals are achieved in neighbourhood centres which have better carparking and cross-trading potential.

 

More stories:

PROPERTY: 7 $1m+ units for sale at Mackay Harbour

SUBURB GUIDE: Find out what your property is worth

Luxury homes: 11 $1m+ Mackay properties on the market

How Mackay weathered the COVID-19 real estate storm

Iconic Mackay hotel sells for millions at auction

 

 

"We are aware of a recent neighbourhood centre shop rental of $45,000 per annum gross to a new, local start up retailer.

"These leases were executed at the beginning of the COVID-19 pandemic.

"There are still a number of large vacancies within the bulky goods retail sector.

"We are not aware of any new retail investment sales, although we believe that there would be continued strong demand for neighbourhood shopping centres with strong anchor tenants and

long average lease expiries.

"We would expect to see a tightening in yield rates if any new transactions were to occur."

 

Corner of Wood and Victoria Street. Mackay CBD. Picture: Tony Martin

Subscriber benefits:

Your daily dose of Harry Bruce cartoons

Five ways to get more from your digital subscription

WATCH: Your guide to reading the Daily Mercury online

Daily puzzles and Sudoku another reason to stay subscribed

We're still here: How to contact your journalists

 

Herron Todd White valuation policy and compliance director Kevin Brogan said he had seen commercial resistance to change first-hand.

"While in the United States in 2019 - pre-pandemic but with retail still struggling due to online - there were several large shopping centres across the nation that were shutting down because the cost challenges were deemed too severe," he said.

"We may well see a return to 'main street' shopping as people shy away from enclosed shopping spaces.

"By securing the right tenancy mix organically and creating a community space that caters to its residential catchment, main streets overcome some of those cost and time hurdles that face large, enclosed, single-owner shopping centres."

Mr Brogan said this should extend to a reinvention of city-centre retail.

"Because of COVID, city centre retailers face the challenge of the loss of customers due to less 'commuting shoppers', office workers and tourists.

"They also need to deal with high overheads and customers paying for parking.

"But there is now an opportunity to rethink this space as a shopping destination hub."

Mr De Francesco had some sobering advice for those operators who feel it was all too difficult.

"The transformation process has risks, but the question is, 'Is it riskier if you do nothing?," he said.

"I think everyone's come to that point. By remaining idle and lethargic, there's more risk because the increasing obsolescence of what you're offering to the community is more apparent.

>>More Mackay property stories

"COVID has made it absolutely black and white that the retail model needs to change now to survive."

Mr De Francesco also sees a door opening for new participants in retail property.

"If you're not in the retail space and you want to get into the retail space, I think this is a great time because you'll find opportunities," he said.

"Some current owners will want to get out because they see the sector as too risky or too hard.

"Others might buy in at this point in the cycle at a relative 'bargain'.

"What was someone's constraint or challenge is somebody else's opportunity."

Originally published as