International retailers are continuing to fuel a race for space in the Pacific region, with over 90 groups seeking to roll out stores in Australia and 50 retailers eyeing New Zealand, according to a new CBRE report.
According to the property firms research, despite the pick-up in activity in recent years – international brand penetration rates in Australia and New Zealand remain low relative to other developed nations.
The penetration rate in Australia is 28 per cent, which is low relative to other countries in the region including China, Singapore and Hong Kong, all of which have penetration rates in excess of 45 per cent.
New Zealand’s penetration rate is even lower at 16 per cent, which CBRE said highlights significant catch-up potential in both countries.
Alistair Palmer, national director of CBRE’s Retail Services Group, said the research also highlighted that international retailers were increasingly viewing the Pacific as one region.
“Previously, international retailers focused on Australia followed by entry into New Zealand, usually after a few years,” Mr Palmer said.
“Recent developments indicate that international retailers increasingly view the Pacific as one region, with an initial target of the three main gateway cities of Sydney, Melbourne and Auckland followed by secondary cities in both countries. This is evident by the international penetration rate of Auckland being on par with Brisbane but growing at a more significant pace, on par with Sydney, in the past year.”
One of the downsides for domestic retailers has been a significant increase in competition for sites and a related increase in rents.
However, CBRE said that displaced domestic retailers could increasingly seek secondary centres and this will have a positive impact on centres and locations that currently struggle as a result of low retailer demand.
The report also tips that there will be a shift in the type of international retailers entering the region.
The head of CBRE’s Pacific Retail Occupier team, Tim Starling, said luxury retailers were the largest group to enter Pacific last year and this trend was expected to continue for a further two to three years. However, a slow-down was then expected as these groups approach their store targets.
“Over the next five years, we expect mid-range fashion and specialist clothing brands to show a rising contribution to brand entry rates in Australia and New Zealand,” Starling said.
“These retailers will have a more wide-ranging impact than the luxury brands, as they tend to focus only on CBD or prime regional centre locations.”
CBRE’s report highlights that the retail landscape in Australia and New Zealand has already undergone significant change, with the arrival of international brands having driven up CBD rents, leading to regional shopping centre redevelopments and the activation of new retail precincts in both countries.
McNabb said a strong preference for international brands, food and beverage and retail-tainment from the younger demographic was supporting this change, as was an increase in tourist arrivals from China.
Chinese tourist arrivals have tripled in Australia and quadrupled in New Zealand over the past decade, which is supporting retail trade, particularly in the major CBD markets.
“Chinese tourists not only spend more per visit, but they also have a higher appetite for goods purchase to take home, as opposed to western tourists,” McNabb said.
“Another market driver has been Australia and New Zealand’s consumption per capita, which has grown at twice the rate of the U.S. over the past decade. This has contributed to the sales productivity of some international brands being among the highest in the world which, coupled with low international brand penetration rates, is making this region highly attractive.”