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6 Retail Opportunities for 2021

This article first appeared on LinkedIn.

2021 is set to be a defining year for retail. Retailers and entrepreneurs are wondering how they can best position their businesses for a prosperous year. It’s a pragmatic moment for retail tenants to negotiate lower rents, renegotiate lease terms, find a new site, repurpose or downsize. Times may have been tough, but retail businesses should consider the massive new opportunities. What solutions aren’t people seeing, what are smart retailers doing?

As vaccine plans are rolled-out and Federal and State governments continue to spend big, growth, jobs, credit and liquidity are on the rise. Household spending jumped in November as Victoria came out of lockdown and Black Friday went ahead, with retail sales up 7.1% month-on-month. State-based COVID leasing negotiation rules have been extended — continuing to apply to commercial tenants & landlords across Australia in 2021.

Trends in experiential retail, digital marketing & eCommerce, and retail footprint rationalisation are still key (as explored in our 2018 article)! But there are also new prospects: fulfilment innovation; omnichannel retail hybridisation; downward rents pressure in key retail locations; and the emergence of successful ethical brands & products.

We’ll explore the 6 big retail opportunities for tenants below:

Same-day delivery, Click-And-Collect & other fulfilment innovations

Omnichannel retail: hybrid online-offline; experiential shopping

Rationalisations and relocations

eCommerce, digital marketing & new technologies

Ethical, values-based brands & products on the up

Downward pressure on rents in CBDs, shopping centres & more

Same-day delivery, Click-And-Collect & other fulfilment innovations

Post-pandemic, retailers big and small are creatively reimagining how they get their products & experiences to customers. Businesses in verticals from apparel, to food, to homewares, are prioritizing fulfillment and other operations innovations to fight rising costs and meet consumer expectations.

Delivery becomes the new normal

Cheap (if not free), same-day (if not faster) delivery is becoming increasingly widespread, as a 2020–21 trend in the logistics of retail. Delivery and courier services like Uber Eats, Deliveroo, Menulog and DoorDash ramped up exponentially during the pandemic, as well as eCommerce grocery platforms — but demand for delivery hasn’t just increased for food. According to Shopify, 64% of consumers globally expect any order shipped for free.

The challenge historically with same-day shipping is that it’s been difficult to arrange cost-efficiently — warehouse proximity to customers and inventory management being the main factors. This has led to different innovations, such as retailers partnering with ‘last-mile’ delivery companies to fulfill online orders. Other retailers have begun offering direct local delivery, which is faster than traditional shipping, provides more work to retail workers, and gives the business full control over the customer experience. In many cases improved package tracking solutions also mean that consumers can receive real time, last-minute notifications about their order.

Consumer-to-Manufacturer

Expanding delivery options are part of a broader ‘Consumer-to-Manufacturer (C2M)’ shift in retail, where customers are having products sent directly to their homes from warehouses, can click-and-collect from in-store, and retailers & eCommerce businesses are shipping from multiple locations, including brick-and-mortar storefronts and wholesalers.

Since retail tenants often already have the real estate that eCommerce or fulfilment providers need, brick-and-mortar businesses are uniquely positioned to facilitate delivery. As some leased storefronts underperform due to a lack of foot traffic, smart retailers have been looking to use them as fulfillment hubs. Large format or bulky goods retail in particular may be looking to move into shopping centres where vacancy rates have risen in order to make use of logistical advantages.

In Australia and elsewhere, there’s now evidence for the advantages of converting, or partly-repurposing, storefronts into mini-fulfillment locations and even mini-distribution centres — particularly when paired with last-mile delivery services. It’s a great way to leverage unused retail floorspace, offer a pickup point, and reduce online fulfillment costs and delivery times. Big retailers like Kmart pivoted to turn their stores into drive–through or click-and-collect centres, in order to fulfil online orders.

Peter Blade, Head of Industrial for Western Sydney at JLL noted that:

“We might see more existing stores repurposed to become dark stores and dedicated dark stores spring up in residential neighbourhoods as strategic hubs to service populous areas.”

Many retailers are recognising the potential synergies between store and delivery/collection, and may be looking to relocate, downsize or repurpose their lease with this in mind — find out more.

Proprietary Shopify data reveals nearly 100,000 brands worldwide began offering roadside pickup during the pandemic. Despite being relatively small markets in global terms, Australia (7,828) and & New Zealand (2,037) are near the top of the list — nodding to the intensity of COVID restrictions and how much they have, and will continue to, shape retail practices. In the U.S., click-and-collect commerce, including roadside pickup, is forecast to top $64 billion in 2021.

Other fulfilment innovations

Crucially for smaller volume retailers, there’s been a proliferation of third-party services to whom businesses can outsource fulfillment operations to streamline processes and reduce hassle.

Investment in reverse logistics is another big one — due to spike in 2021 and forecast to hit $604 billion globally by 2025 — as retailers seek to alleviate a pain point in the shopping journey and minimize the costs of returns. Streamlining the return process — for instance by instantly giving customers store credit, pre-fill return labels and self-serve returns — makes business sense when 96% of consumers will shop with a retailer again based on an “easy” or “very easy” return experience. Ironically, returns are a great way to retain business!

Inventory management automation is another important lever to reduce wait times, expedite fulfillment, and reduce shipping costs.

2021 should also see increased use of autonomous deliveries, smart sensors, blockchain tracking, and digital twinning to increase delivery speeds and cost efficiency. Robotics technologies like self-driving and drone deliveries are no longer pure novelty (but remain shy of mainstream status — costs still need to come down).

Omnichannel retail

“The physical store is certainly not dead, otherwise Amazon wouldn’t be building them”

— that’s the quote from Michelle Beeson, analyst of e-business and channel strategy at Forrester Research. Sometimes the hype makes it easy to forget just how bricks and mortar remains — online sales made up just 11% of total retail turnover in November.

Nonetheless, traditional shops and other retail businesses are changing the nature and uses of their property — from “experience centres’’ (where merchandise is sampled and ordered for later receipt) to mini-distribution centres, to models that integrate online and offline experiences more coherently. Melissa Gonzalez, a retail strategist and the CEO of U.S-based The Lionesque Group, believes brands and retailers will “take a more holistic look” at their physical stores and omnichannel options this year — with diversity & flexibility being key.

Hybrid online-offline

There’s a two-way process happening where online stores have been popping up in offline spaces — like Amazon moving to forms of traditional retail — and traditionally ‘offline’ businesses are going online (traditional retailers building presence in marketplaces to stay relevant in the digital age). But it’s more than just a trend of online going offline and visa versa.

As e-commerce grows, larger brick-and-mortar retailers are restructuring — capital allocation often now works on a tiered basis, where flagship destinations exist in prime locales and are complemented by smaller-format, specialty locations anchored around a specific purpose or localized effort. “Partnering with department stores will also continue to be reimagined as they restructure and reposition as collaborative marketplaces, and there will be a deeper dedication to pop-in-shop retail,” says Melissa Gonzalez.

Right now, retailers may be rightly concerned about their property footprint, but with so much change in consumer behaviours off the back of health-related regulations, businesses do have to take risks. One story that bucks the obvious retail trend is that of Ikea: despite a dip in full-year sales, the retailer opened 26 new locations globally to October 2020, and plans to open a total of 50. Part of the rationale for this is that most of their customers start their shopping journey online, but few are channel-specific. Furthermore, they gauged that consumers would use newfound spare time to make home improvements. Another story, out of the UK, is food-to-go chain Greggs, which rolled out its click-and-collect and home-delivery propositions faster than planned. The high street brand is also resuming its store opening programme — 20 new stores this financial year. For some retail businesses, right now is the time to expand.

Another response to COVID’s long-term impacts is combining reduced physical space and increasing product assortment to focus more on niche products and local suppliers that shorten their supply chains. Some retailers are partnering to increase product range or fill a demand exposed by the pandemic, like masks, partitions and other necessities.

Experiential shopping

Within the online-offline mix, recent years have seen ‘experiential retail’ becoming more relevant as part of ‘the broader reconceptualisation of traditional ‘bricks and mortar’ retail (as we wrote in 2018). Historically, research has shown the desirability of experience-oriented tenants — like movie theatres, gyms and restaurants — however these were severely impacted by COVID in some cases. Non-discretionary spend tenancies — like supermarkets and healthcare centres — have been very resilient. Grocery and healthcare-related tenants bring a necessarily experiential & non-discretionary offering to retail precincts — with the COVID only exaggerating these strong fundamentals.

Beyond the particular verticals in retail that have been able to provide a valuable bricks & mortar offering, the blurring of lines between online and offline commerce means retailers have more opportunities to create blended in-store experiences. 82% of smartphone users now use their phone while inside a store to make purchase decisions — showing the importance of online channel experiences to success in traditional retail spaces.

Examples of similar digital-enabled retail experiences include London-based furniture retailer Made.com, who offer barcode scanning in showrooms and enable online customers to video chat with in-store assistants to find out more about how a product looks and feels. In IKEA’s new “small footprint” stores, which launched in spring of 2019 in Australia, and are planned for the U.S., customers can book appointments in private rooms for design and planning sessions, and then order goods to be delivered, rather than hauling them home from the warehouse themselves.

These omnichannel approaches are not only richer in terms of the experience afforded the consumer — they represent a necessary evolution in response to cost-efficiency and health-restriction pressures on retailers. Considering lease strategy, fit-out options, and overall retail property footprint is definitely important this year.

Rationalisations and relocations

For years now, retailers have been adapting to structural changes facing the industry — including rental cost pressures and the growth of eCommerce. The growth of alternatives to CBD-area retail — like new commercial-residential precincts in cities and regions across Australia — is becoming ever-more pronounced.

The story of Green Square in Sydney — anticipated to be the most densely populated region in Australia after an $8 billion investment in urban renewal — continues as an example of locations offering new retail options with lower occupancy costs. Green Square offers retailers proximity to public transport, major road networks and the airport. But Green Square is just one of many new growing, connected urban hubs, including Parramatta, Liverpool, Macquarie Park, Rhodes, Campbelltown and Penrith — and that’s just around Sydney. Lower costs, better connectivity, and new worker-consumer hubs mean relocating, or rationalising retail portfolio footprints, is attractive to many retailers.

The relocation of commercial real estate zones within and between cities around Australia predates COVID, but the process has been accelerated, with implications for retail.

Commercial real estate in regional areas is set to see high demand in 2021, with the June quarter of last year showing the biggest movement out of capital cities and into regional areas ever recorded.

Whether it is a shared workplace building in Byron Bay, a new distribution facility on the Gold Coast, or office complexes around Melbourne or Sydney’s 3 Cities, all these city fringe, suburban and semi-regional locations are increasingly relevant.

Companies are downsizing and rationalising their commercial real estate footprints to weather tough economic conditions, and also because they need to have a way to continue operating even with CBD-shutdowns. Commercial property industry participant Grant Atchison asks, “If you have a large workforce, can you separate them into different buildings and continue to operate during a shutdown? That’s going to be a risk management element [for corporates]” — and this is something for retailers (especially food & beverage and other immediate goods & service providers) to consider. Again, this is a pre-COVID trend — corporates have been disaggregating their office portfolios and relocating components of their business to the “Parramattas of the world” — with long-term implications for retail businesses.

Previously secondary urban and regional centres are now prospects for new retail sites.

Office disaggregation and the relocation of other commercial activities has been complimented by the COVID-shift to working from home (WFH). Consumer and remote-worker relocations away from city centres — to suburbs and coastal and regional cities — compound implications for retail demand.

And this isn’t just a phase: in The Deloitte Global Millennial Survey 2020, more than 60% of respondents said they want the option to work remotely more frequently, even after the pandemic fades.

Additionally, towns in NSW like Orange, Dubbo, Wagga, Tamworth, Bathurst have prospered from local tourism whilst international borders are shut. This enhances their development as regional centres, and likely destinations for ongoing migrations of remote workers and other consumers from major cities in the coming months and years.

eCommerce, digital marketing & new technologies

The importance of eCommerce, digital marketing channels and new tech adoption can’t be understated for many retail businesses.

IBM’s 2020 U.S. Retail Index reports that COVID-19 has accelerated the shift to digital shopping by roughly five years.

The question is how do retailers ensure their lease arrangements are best-suited to complement their digital sales mechanics, and vice versa?

Growth of eCommerce

With seismic shifts brought about by COVID-19, online hit 12% of total retail for the month of March, according to the Australia Post 2020 eCommerce report. They anticipate online to now hold approximately 15% of the total retail market. According to Leighton Hunziker of Savills Australia, this shift to online sales may have been equivalent to 4 years of historic growth (and while some will revert, some will remain sticky to online channels, which should continue putting downward pressure on retail rents overall).

Specific industry beneficiaries of this growth in online retail have been wine and liquor (sales reaching over 160% YOY in March-April); fashion (reaching highs of 100% YOY), entertainment, self-improvement and DIY.

Online shopping is now more important than ever.

Whether it is streamlining the online user experience, improving the supply chain or adding more tech-minded people to your team, ecommerce must be a priority for the year ahead. This is reflected in the growing share of digital ad spend.

Estimated percentage change in 2020 ad spend versus 2019 (Source: Shopify)

What does this mean for smaller, or fast-growing retailers? Getting the eCommerce side of your business up to scratch can be daunting, but 2020’s proliferation of self-service online commerce platforms (fast to setup; don’t require developers & consultants) has shown us how quickly small businesses and entrepreneurs can digitally pivot their businesses. There are affordable options for your first eCommerce store worth considering.

Social Commerce

Social commerce generally refers to ‘native’ shopping experiences on social media platforms. Instead of clicking through to a third-party website, users can make purchases seamlessly from inside the social media app or site. This sales channel is growing, with 2020 yielding a partnership between TikTok and Shopify, an expansion of Snapchat’s Native Stores for brands, and the introduction of Facebook Shops.

Technavio recently reported that the social commerce market is poised to grow by $2,051 billion during 2020–2024, progressing at a compound annual growth rate of almost 31 percent. And regardless of where sales take place, social media will continue to introduce many customers to brands. For many retailers, it’s an important one to look at.

Other giant digital marketplaces — like Amazon — also continue to grow in importance.

Half of all global ecommerce sales occur on marketplaces, compelling brands to participate.

And this is getting easier, with Amazon just having introduced more tools for brands to build unique brand identities — so you can present to your customers in the way you want.

Influencer Marketing

According to Influencer Marketing Hub, the influencer marketing industry was expected to reach $9.7B in 2020.

Many retailers have a content problem — they’re unable to create enough content at scale to support their marketing efforts. “In 2021, a trend we will see is brands looking to influencers as content creators to support the content creation process in lieu of a content agency,” according to Jordie Black of ZINE. But what does influencer marketing mean for fast-growing or non-eCommerce-based retailers?

Influencer marketing used to mean ‘manicured selfies, carefully-crafted captions, and heavily-edited product shots’ but we’re now shifting towards more authentic, raw expression: ads that aren’t over-produced; ads that prioritise entertainment, education and more.

And the new ‘non-fancy’ of a lot of influencer marketing does mean lower production costs!

Even if their audience is relatively small, campaigns with ‘micro-influencers’ who authentically align with the values and beliefs of both your brand and your customers can yield results.

So, how can retailers implement some influencer marketing of their own to boost sales? Digital agency CoreDNA advise the following:

Make a list of local or micro influencers that share your brand value.

Build a relationship with them by helping them to grow their audience first and/or providing free merchandise.

Give them the freedom to create the way they want to create.

Pro tip: Take advantage of NEW features on social media platforms since the algorithm rewards the adoption of these new features. For example, Reels on Instagram get more organic reach than regular posts or stories. So, every time there’s a new feature, get on the bandwagon and experiment.

One of the main formats influencers engage with their audiences through is live-streaming: Interactive Advertising Bureau recently reported that

livestream-generated sales are expected to double to $120 billion worldwide in 2021.

From a media mix perspective, video will be 2021’s most important medium for influencer partnerships. With changes to brick-and-mortar footfall, there’s a growing place for customers watching others try on apparel or test out gadgets through video.

Video, AR and VR

In a global survey from 2019, 51% of consumers said they’d be willing to use Augmented and Virtual Reality (‘AR’ and ‘VR’ respectively) technology to assess products. And while AR in retail isn’t new (Facebook bet big on it in 2018), it’s gone from a nice-to-have to a more central part of some retailers’ ecommerce offerings — especially post-COVID.

And this isn’t just for big brands:

Shopify AR for example is an easy-to-use toolkit for businesses to create their own AR experiences to showcase their products to customers. And it works: Shopify reports that interactions with products having AR content showed a 94% higher conversion rate than products without AR.

A prime example of AR experiences are virtual fitting rooms. Head of Products & Resources at US-based services company Cognizant Technology Solutions VP, Rohit Gupta, explains

“Even before the pandemic, it was expected that the global virtual fitting room market would reach over $10 billion by 2026…

“Since AR, AI and VR innovations can address some customer concerns around health and hygiene, we will likely see an increase in the adoption of such technologies”. Apparel brand Knix worked quickly post-COVID to develop a low-fi version of a virtual fitting, so shoppers could still find their proper size without a store to visit. Customers select a date and time for their 20-minute consultation, an appointment is set, and on the day of the virtual fitting the customer receives a reminder message introducing them to their “Knixpert” (in-store associates who had been redeployed to digital). 97% of all time slots to date have been booked by customers.

Beyond apparel, there are other AR-enabled ways to ‘try before you buy’, which are increasingly practical for retailers to implement, and increasingly demanded by consumers. For instance, sales can happen in a virtual environment — Knix hosted a virtual warehouse sale that was hugely successful. They created a distinct, branded virtual storefront with Shopify Plus. And just as their physical warehouse sales focused on the experience of hunting for and finding great products, the virtual site was designed to recreate this excitement. They used 100% unpaid social and email promotional tactics to let customers know about the virtual warehouse sale 48 hours in advance, and achieved the following:

35,000 people shopping at once within 10 minutes of the sale going live

Handled 5,000 customers in checkout simultaneously

Knix still know the value of their retail space (including warehouse and other larger-format retail environments) — and they’ve added VR eCommerce to support it.

Other retailers are also seeing the value of video consultations as a sales tool: whether a consumer is buying a car, furniture or upscale clothing, it’s an intimate way to start a conversation that may end in-store. AR & VR are increasingly going to be part of omnichannel offerings in the ‘new normal’ for retail.

Smart Speaker shopping

As of 2018, 27% of the global online population was using voice search on mobile. Around 20% of smart speaker owners now use them for shopping activities, such as ordering products, conducting product research, or tracking deliveries. This figure is expected to jump to 52% within the next four years. Alexa, Google Home and other smart home assistants are increasingly relevant for retailers when considering search and fulfilment.

Chatbots

Chatbots are projected to save the retail, banking and healthcare sectors over $11 billion by 2023. 24/7 availability, proactive assistance (with the ability to pre-program responses, apply machine learning) and the ability to transfer customers to real-people, are some of the benefits offered by chatbots. Other solutions designed to pull answers on-demand and share information proactively are FAQ pages, knowledge centers and Visual IVR technology.

AfterPay and other payments innovations

More payments options and ‘buy-now-pay-later’ services like Afterpay, Klarna and Splitit, are another aspect of retail innovation maximising sales in-store and online. Now instead of being restricted to debit and credit cards, you can pay using mobile options like Apple Pay, Google Pay, Venmo, PayPal, and even cryptocurrencies. Biometrics is coming to remote payments as well, with Juniper Research predicting that mobile biometrics will authenticate over $2 trillion of sales by 2023, 57% of biometric transactions will be remote by then.

Importance of retention over acquisition

Rising competition for online attention has reinforced the value of keeping existing customers. Retention has overtaken acquisition and conversion as a top priority for many businesses. Subscriptions are one way to achieve this — and though just 15% of online shoppers receive products on a recurring basis today, 75% of B2C businesses will offer subscriptions by 2023. Also, launching a rewards program increases second-purchase likelihood by 47%. This can be enhanced by using limited-time points, discount codes, or even a countdown clock, and brand loyalists should then be turned into a sales force through referral programs.

Ethical and Values-Based Brands & Products on the Rise

Offering genuine transparency, or taking a stance on particular ethical issues, can be risky for brands, but when done right, it can build lasting customer loyalty, and most importantly, drive the bottom line. Retail brand’s support for the Black Lives Matter movement for example, however dubious in some cases, shows how political stances can be taken that fit-with and add-to brands.

According to the 2020 Edelman Trust Barometer Special Report, 58% of US consumers want brands to educate the public or advocate for racial equality and 60% want them to invest in addressing the root causes of inequality. Customers, particularly those of younger generations, appear to be more belief-driven and conscientious in their consumption decisions, preferring brands they consider supportive of social issues such as gender equality, climate change and more. Purpose-driven consumers — approximately 40% of all consumers — want products and brands that align with their beliefs, and are willing to pay a premium. Gen Z, now the largest consumer group, leads the trend.

In line with pandemic restrictions on movement, the ‘shop local’, ‘shop small’ and ‘shop sustainable’ movements have been given huge boosts across the board. And growth in the number of commercial retailers building sustainability and transparency in their business models is a trend that pre-dates COVID and will continue into the future. For food & beverage retail this may mean offering varied dietary offerings, from vegan and plant-based food to gluten-free options (likely to increase next year in the food retail industry). 72% of global consumers want brands to use sustainable packaging (many will pay a premium for it — with a focus on zero-waste, reused and recycled packaging, as well as reduced package sizes, and redesigned shipping cases.) Other trends include ReCommerce (second-hand) markets growing. It’s well-worth thinking about how you can build ethical impact into your retail business.

Downward pressure on rents in shopping centres, CBDs and elsewhere

Across all CBD property types, including office, retail and residential, there has been growth in vacancy rates in 2020.

There’s no doubt that CBDs were severely impacted by COVID-19. Business and consumer relocations away from city centres — to suburbs and coastal and regional cities have had implications for vacancy rates and rents. CBD and Shopping Centre vacancy levels increased marginally in WA for example, due to reduced customer foot traffic and subsequent reductions in turnover. And this presents opportunities for retailers who may benefit from CBD or shopping centre exposure.

This is even more relevant at the present moment when office workers are returning to CBDs — there is a buzz coming back to the cities again, even if it’s moving in fits and starts to some degree — and office and retail space high on the agenda. Ultimately many businesses and employees did miss the office, and that’s why for many, offices will retain a central role in corporate life — along with the retailers who service them. In mid-December, the public health order requiring employers to allow employees to work from home was repealed in NSW, while Victoria is slowly easing restrictions. In other states, most restrictions have been pulled back for some time.

Suburban shopping centres have generally recovered well, particularly smaller neighbourhood centres, which proved resilient throughout the pandemic period due to their strong reliance on everyday grocery and convenience. 2021 promises to stabilise sales and rents (and at a lower and more sustainable rental level).

Some of the rents for retail tenants in shopping centres are the lowest they’ve been for decades — there’s plenty of opportunity for aspirational retailers.

Better conditions for retail tenants generally can be expected in 2021 as office workers, students and visitors slowly return.

We hope this has been an instructive read for Aussie retail businesses looking at what to do for the year ahead. If you have questions about how to optimise your leasing situation, win rent reductions, or relocate (in order to help your bottom-line!) — don’t hesitate to get in touch.

Phil Reichelt - Director of Tenant Leasing Group - has 20+ years experience securing optimum deals for tenants across Australian retail, commercial and industrial markets. Specialising in well-informed tenant representation, he is straightforward and plain speaking, able to offer sound advice in lease negotiation and acquisitions, management, disposal and future-site strategy. He works with innovative, challenger brands in retail & other sectors, as well as established institutions wanting reliable management of mergers, expansions, relocations and rationalisations. In short, Phil consistently delivers maximum value, ever focused on helping ambitious clients get ahead by working smart to realise growth and rapidly create a niche in their sector.

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UPDATE: Code of Conduct For Commercial Tenants Negotiating Leases in 2021

UPDATE 10/01/2021:

The regulatory environment for commercial tenants negotiating with landlords has undergone several changes since the first emergency measures were introduced in 2020. The National Cabinet Mandatory Code of Conduct remains in effect, since JobKeeper program was extended to March 28 2021.

Each State and Territory has their own rules that continue to apply to commercial leasing negotiations between tenants and landlords. WA, South Australia and the ACT were the first jurisdictions to commit to extending their measures into 2021. NSW, Victoria and QLD also announced extensions to their COVID-19 leasing regulations into the new year. Tasmania and the NT have similar legislation that remains in effect.

It’s important to know who to contact about commercial lease negotiations in your state. Tenant Leasing Group are dedicated to staying on top of the new regulations to make sure we can negotiate hard for our clients. We can help with re-negotiating retail lease terms, downsizing offices, finding new sites, consolidating your portfolio and more. Get in touch if you’re a tenant looking for support with your commercial lease!

National Legislation

National Cabinet Mandatory Code of Conduct: SME Commercial Leasing Principles During Covid-19

National COVID-19 Safe Workplace Principles

National COVID-19 Industry Information For Workplaces – Safe Work Australia

NSW Legislation

NSW COVID-19 Legislation Amendment (Emergency Measures) Bill 2020 – schedule of amendments

NSW Retail and Other Commercial Leases (COVID-19) Regulation 2020

NSW COVID-19 Emergency Amendment (Emergency Measures) Bill 2020

COVID Safe Businesses – Safe Work NSW

VIC Legislation

VIC COVID-19 Omnibus (Emergency Measures)(Commercial Leases and Licenses) Regulations 2020

VIC COVID-19 Omnibus (Emergency Measures) Act 2020

Coronavirus (COVID-19) For Workplaces – WorkSafe Victoria

QLD Legislation

Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020

QLD – COVID-19 Emergency Response Act

Keeping your workplace safe, clean and healthy during COVID-19 – Worksafe Queensland

SA Legislation

COVID-19 South Australia Emergency Response Bill 2020

COVID-19 South Australia Emergency Response (Further Measures)

Coronavirus (COVID-19) – WorkSafe SA

WA Legislation

WA Act – Commercial Tenancies (COVID-19 Response) Act 2020

COVID 19 – Coronavirus – WorkSafe WA

ACT Legislation

ACT Leases (Commercial and Retail) Act 2001 – COVID-19 emergency response amendment.pdf

ACT COVID-19 Emergency Response Bill

Work, Health and Safety and COVID-19 – What you need to know – WorkSafe ACT

TAS Legislation

TAS COVID-19 Disease Emergency (Miscellaneous Provisions) Bill 2020 (March 25 2020)

TAS COVID-19 Disease Emergency (Commercial Leases) Bill 2020 (May 6 2020)

COVID-19 Safe Workplaces Framework – WorkSafe Tasmania

NT Legislation

Business Tenancies COVID-19 Modification Notice 2020

NT Tenancies Legislation Amendment Bill 2020

Coronavirus (COVID-19) – Steps to the new normal business restart – NT Government

Phil Reichelt - Director of Tenant Leasing Group - has 20+ years experience securing optimum deals for tenants across Australian retail, commercial and industrial markets. Specialising in well-informed tenant representation, he is straightforward and plain speaking, able to offer sound advice in lease negotiation and acquisitions, management, disposal and future-site strategy. He works with innovative, challenger brands in retail & other sectors, as well as established institutions wanting reliable management of mergers, expansions, relocations and rationalisations. In short, Phil consistently delivers maximum value, ever focused on helping ambitious clients get ahead by working smart to realise growth and rapidly create a niche in their sector.

[phil-reichelt-tenant-leasing]

Get help with a commercial lease deal: start by knowing who’s on your side

This article first appeared on LinkedIn.

This is a guide for any commercial tenant looking to find a new site, change their office footprint, or just understand how lease negotiations work. As a business, it’s crucial you know who to trust.

Knowing who your interests are aligned with can give you the leverage you need to get the best property deal as an occupier. And on the other hand – what are conflicts of interest, and how do you spot them as a lessee? For businesses navigating the trying conditions imposed by the COVID crisis, these questions are more important than ever.

For example, consider a business executive looking for a new premises: commercial agents working for landlords have an obligation to show them the specific property they are tasked with representing – whether or not that site is the best for the prospective tenant. The agent is commercially bound to serve their client’s (the landlord’s) interests by pushing the vacancy they have been tasked to fill and getting the highest possible price and the most profitable lease terms for it. While they may claim to help tenants with site selection and lease negotiations, in the end they are paid to find clients to fill space – not the other way round. A commercial landlord agent in this case has a ‘conflict of interest’ when advising commercial tenants.

So, who should you talk to as a business owner or senior executive looking for support with lease negotiation or other commercial property advice? Let’s break down each of the key players in the commercial property world, to understand who may be best to contact for your specific real estate needs:

● ‘Tenant reps.’ who play both sides of the fence;

● Exclusive, independent, tenant-only representatives;

● Commercial landlord property agents; and

● Owners/landlords.

‘Tenant reps.’ who play both sides of the fence

Then there are those ‘tenant reps’ who are employed by the large real estate firms (and may sit within ‘Tenant Services’ departments): while they may claim to represent tenants, their remuneration actually comes, either directly or indirectly, from building owners. These sorts of ‘tenant representatives.’ may be better described as ‘landlord representatives’. The large commercial real estate players now often now have, in addition to asset services, project management, and investment services, a dedicated department for ‘tenant representation’ services. ‘Representatives’ in this position have a conflict of interest because their employer’s principal commercial arrangement is usually with supply-clients (owners), rather than demand-side clients (tenants).

These representatives are ultimately representing the landlord’s best interests.

Working with a landlord rep. will almost certainly put you in a weaker negotiating position when it comes to sorting a lease for your premises. They are employed by owners to fill vacant space on the terms most favourable to those owners, not the tenant. Commercial tenants are likely to suffer financially in this arrangement, as the priority for these ‘representatives’ is to optimise the rent extracted from tenants.

Exclusive, independent, tenant-only representatives – it’s in the name!

By contrast, ‘exclusive, independent, tenant-only representatives’ exist solely to protect and advise in the interests of commercial tenants. This is where Tenant Leasing Group fits in the picture! Our remuneration comes solely from the tenant – not from landlords, developers or agencies. We don’t receive commission from the opposing side of the negotiation for finalising a lease deal – as real estate agents do.

And since we, like other independent tenant-only representatives, work for commission from the tenant (receiving a percentage of the money that is saved through the negotiation), we directly benefit when the tenant saves money.

This is the direct relationship between tenant savings and representatives’ success I mentioned earlier.

Put another way, since the tenant is in charge of paying our bill, our incentive is to get them the best deal. Since tenant-only reps. only represent tenants (it’s kind of in the name), their job is to represent the tenants’ interests only. This removes any potential for conflict of interest.

We have no contractual obligations with landlords, giving us the freedom to negotiate independently and effectively, solely on behalf of the tenant.

Independent tenant-only representatives work to protect and advance the tenant’s interests in all dealings with real estate agents, landlords and other property professionals.

As the old adage goes – ‘every landlord has an agent, so tenants need one too.

In the case of us here at Tenant Leasing Group that means securing the best sites, rents and lease terms for retail, office, industrial, healthcare, and large format retail (including e-commerce and food distribution) properties that meet our tenant’s needs – not the landlord’s’. We work closely with tenants – including retail stores, restaurants, bars, professional services firms, large format retailers, healthcare providers and other businesses – to get them the strongest possible package of leasing terms, rents and incentives. Our sole commercial responsibility is to the occupier.

Independent tenant-only representatives run all lease negotiations and conduct site searches themselves. It’s in their interests – working for the tenant – to find them fit-for-purpose property at the sharpest price so that they can maximise the tenants’ savings. Furthermore, independent tenant reps.’ responsibilities don’t stop after the transaction is done – they support tenants through all leasing procedures and interactions with other parties. They are effectively the tenants’ dedicated professional commercial property representatives, paying undivided and unbiased attention to the tenants’ business needs.

‘Tenant-only’

Working with tenants-only, as opposed to working with tenants and landlords (as some commercial agents or non-independent ‘tenant reps.’ do) has several important implications. One way to see these is to consider lease negotiation: the contested process by which the tenant and landlord reach an agreement about the rent, terms and incentives for a site lease. Tenant-only representatives can create competitive tension and negotiate hard and in good-faith with landlords on their tenants’ behalf. It’s clear whose interests they represent, and they aren’t vulnerable to the leverage landlords may have over representatives or agents who are beholden to them commercially.

By working only on the tenants’ side, a representative can be uncompromised.

Independent

Being independent means not being subservient to a larger agent or beholden to any non-tenant commercial interests. Many larger commercial real estate agencies won’t show tenants a property because it’s not part of their portfolio or set of connections. This is indicative of a limited, one-sided knowledge of market and off-market opportunities that is not premised on what’s best for the tenant.

Comparatively, an independent tenant-only representative without allegiances to landlords, or responsibilities to a given property portfolio, can offer a broader view of commercial properties across the market and evaluate them for their value to the tenants business only.

By working independently of larger commercial real estate agencies, a representative can make recommendations freely.

Exclusive

Tenants working with either multiple independent brokers, or indeed a broker who represents the landlord, will almost certainly receive biased advice. In the case of contracting multiple independent brokers, the tenant falls victim to the fact that each broker is incentivized to promote and secure the deal they are proposing above the rest, often meaning they downplay hidden costs or issues with their opportunity (as well as potential advantages of alternative options).

Exclusive tenant representation is valuable because it is driven purely by the commercial relationship between the tenant and their representative – not by multiple brokers each attempting to win business. The only object of recommendations provided by exclusive representatives is to allow their tenant to make an informed decision about the best deal available.

By working exclusively with their client, a representative can be effective and perform to the best of their ability.

Commercial landlord property agents

Most commercial real estate agents work for owners, and are responsible for property management, leasing and sales.

Their principal clients (and therefore the principal sources of their income) are building owners (landlords) – not tenants.

While they may agree to provide certain services to tenants (like site search and lease negotiation) along with a basic standard of care, in the end it’s the landlord who signs their checks – meaning they represent their interests first and foremost.

Some commercial property agents may claim to act in the best interest of both landlords and tenants, and may receive a fee from the tenant as well as the landlord. Representing both parties within the same transaction causes conflicts of interest – ultimately only one party can be prioritised when interests are opposed. And generally, it is the commercial occupiers who are underserved in these cases, due to agents’ allegiance to landlords. Property agents often give jargon-packed advice and may not be fully transparent about negotiation details. Since the overwhelming majority of property agents’ income tends to come from providing advice to landlords and helping increase commercial property values, they almost always put tenants second.

Owners/landlords

Also known as landlords or ‘lessors’, owners of commercial property tend to be investment trusts, institutional owners and high net worth individuals in most markets. They develop or acquire properties and collect rent from tenants through leases, which are generally structured for rental increases over the term of the lease. Given that the owners’ commercial imperative is to maximise the rents they collect from tenants over time,

their interests can be said to be opposed to those of tenants.

Negotiating on behalf of the tenant to protect their interests against the interests of owners is what independent tenant-only representation and commercial property advisory is all about.

Conclusion

Given the complex web of commercial relationships that characterise the commercial property sector, you might expect more tenants to be choosing independent tenant-only representatives. After all,

the reason independent tenant-reps exist is to professionally represent commercial tenants.

And the way they succeed commercially is by getting tenants the best deal – whether that be finding a cheap new site, negotiating a lease (or re-negotiating a lease, which is particularly important during COVID times), renewing, downsizing offices or relocating.

Some tenants do try to represent themselves, or simply take advice and recommendations from landlord agents. But as I’ve explained above, there are downsides to self-representation or reliance on landlord representatives – these arrangements can be confusing, exploitative, time consuming, or simply ‘not a great deal’. The key advantage of partnering with an independent tenant-only representative is that

they share your interests – saving money on rent, finding the best location and getting the best lease terms.

Hopefully this post has made things a little clearer for commercial tenants out there navigating the property world at this trying time.

Phil Reichelt - Director of Tenant Leasing Group - has 20+ years experience securing optimum deals for tenants across Australian retail, commercial and industrial markets. Specialising in well-informed tenant representation, he is straightforward and plain speaking, able to offer sound advice in lease negotiation and acquisitions, management, disposal and future-site strategy. He works with innovative, challenger brands in retail & other sectors, as well as established institutions wanting reliable management of mergers, expansions, relocations and rationalisations. In short, Phil consistently delivers maximum value, ever focused on helping ambitious clients get ahead by working smart to realise growth and rapidly create a niche in their sector.

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Planning your property portfolio for 2019?

Are you starting to think about growth plans for the coming year? I’ve put together some strategic considerations for businesses regarding new developments, key events and policy changes that may be of relevance. If you’re having trouble working out where to make your next move, or have some grand plans that are beginning to seem unachievable, have a read! And feel free to get in touch.

New Developments

First things first, keep yourself up to date with prospective new developments and/or let your tenant rep know you’re interested in being sent information about relevant opportunities. Often you have to put your name on real estate well ahead of time, especially if you’re after a large space. Diligence and planning ahead are essential.

New spaces opening in University’s or other public places will also require an Expression of Interest process, where a retailer will have to submit key lease details and explain how they will enrich the site ahead of time. This process ensures there is less product overlap in a given development, and that the lessee is capable of running the business.

You need to put your best foot forward.

As an example, we facilitated this process for Taste Baguette, when they wanted to open up shop in a new ward at Liverpool Hospital, Sydney. The process can be long, and fiddly at times, so having clean project management and asset delivery is crucial, not only to maximise your chances of securing a position, but also to help create a great final development environment that works as well as it can for your business.

Recent new developments in Newstead, one of Brisbane’s trendiest dining and retail destinations, indicated huge potential opportunities with a growing cohort of young professionals. Our client TotalFusion opened a high-end health and wellbeing centre in the area - TotalFusion Platinum Newstead -

capitalising on the growing market in a strategic and pre-emptive way.

It’s also worth emphasising that new developments don’t just represent discrete business opportunities within a given new build, but growth and development of areas as a whole (and their surrounding suburbs) that can and should be factored into strategic planningfor future expansion or consolidation.

Key Events

Will key events, from sport to music and culture, have an effect on your business? For Sydney it might be Vivid or Mardis Gras. In Melbourne think of the Australian Open, Formula 1 Grand Prix and the AFL Grand Final. But whether you’re based in one of the major metros – Brisbane, Adelaide and Perth included of course – or elsewhere, local events, from music and food festivals to cultural and artistic events, happen all over, and at different points in the year.

How can you maximise your exposure to these calendar events? Could you benefit more from a casual leasing opportunity than a new shop? Pop up opportunities can also allow for company owned stores to test out new products, promote an online store or gauge interest in certain areas. Time and time again I remind people that

in-store sales are no longer the only benefit of brick and mortar to a business.

Seasonal changes and events will also effect the timing of property moves, for example most retail businesses wont want to be fitting out over the holiday season as this will be costly and lead to them missing out on sales in the Christmas rush. Leasing agreements will ideally be coming to terms by September for a November/December opening – again, planning ahead is key.

Policy

How will the introduction or alteration of planning policy influence your prospects for business advancement? In the past year we’ve seen the Greater Sydney Commission introduce the Metropolis of Three Cities, which has been embraced by developers creating new possibilities. Also in Sydney, Badgerys Creek Airport has finally seen some action after years of speculation, with big implications for retailers!

Development of the Western Sydney ‘aerotropolis’ will likely involve a strong influx of young professionals. We are currently researching the best developments for one of our food and beverage clients who is planning ahead and considering alternative spaces in the area.

This is a unique situation with more flexible zoning being introduced to encourage employment,

as the NSW Government is finally encouraging businesses to operate in Western Sydney, helping to reduce commute times, congestion and other liveability indicators by spreading employment and development more evenly across the city.

In conclusion

When planning your portfolio, it is ideal to be aware and informed about future growth prospects and precisely how they relate to your business. These insights are indispensable for strategic planning. New developments, key events and relevant policy changes can be thought of as significant conditioning factors for your business development outlook. Try not to get caught up on specific places and sites as a first point of call, but rather consider how broader area trends are likely to affect your fundamentals – from now into the future. The best possible place as you grow will of course constantly evolve, but being prepared,to see moves as they appear, and to act nimbly and pragmatically to execute on those opportunities, is something you can take the reins on – and that may mean seeking guidance from a tenant specialist.

Philip Reichelt is the Director of Tenant Leasing Group. With over 20 years of experience in the Australian property market, Phil specialises in advising & representing retail, commercial & industrial tenants, and managing transactions from end-end. A credible industry commentator, Phil loves working with established institutions as well as ambitious brands breaking ground in new markets.

Connect with Phil on LinkedIn.

This article first appeared on LinkedIn.

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5 Ways Retailers can Stay Ahead of Online Stores over Christmas

Last year retailers' Christmas sales in Australia didn’t meet expectations. E-commerce is only growing, but surveys suggest people still enjoy shopping in stores, and the festive season can be a really exciting time to entice people in. Christmas also presents the opportunities for up-sells associated with gift giving. I’ve put together 5 tips on how Brick and Mortar retailers can stay relevant amidst the growing popularity of online stores.

Make the most of multi-channel

A mix of online presence and in-store retail means you can make the the best of both worlds. While brick & mortar is still king, recent research by 8x8 Inc. shows that blending “phygital” is working. Past research in Australia has also shown that even those of younger generations enjoy seeing physical products in real life before purchasing them. But also that

many people are now checking online reviews, and comparing alternatives, while they're in-store.

So if you’ve got a competitive product, even if you don’t want to sell it online - do have an online presence, on a platform that enables reviews and price lists at the very least. To go further, see how five key retailers are showing the way to smarter communications, lowering costs while improving productivity and experience.

Take advantage of your customer service advantage

E-commerce stores are consistently upping their customer service game with more data on consumers accessible than ever before, being put to use to segment communications among other things, and improved packaging and shipping. But Brick and Mortar retailers still have the powerful ability to gauge moods and offer personal service face to face. Staff can offer the authentic, human touch:

giving gift recommendations, styling advice, or just a friendly conversation to add value and depth to a customer experience.

Make the store social media worthy

I was recently walking through the David Jones spring flower display to get to another part of the store - I could hardly shuffle through: “What a nightmare!” I thought to myself. Looking around all I could see were

people with mobiles held at eye level - everywhere!

If you have a look at the individuals' Instagram profiles, as well that of DJ's, you better believe it will be SATURATED with posts about the event. Anything that encourages people to share your business online and be excited to be in-store is great marketing, especially with all the noise online about e-commerce stores.

Offer payment plans

Afterpay is crazy popular right now.

It’s even one of the most talked about stocks. Retailers, especially those offering larger purchase $ values, may want to consider adding a payment plan to maximise accessibility and sales. Technology like Afterpay should be part of a broader approach, whereby updating your technology increases efficiency and customer experience alike. Afterpay-type arrangements also have the added benefit of helping distribute cash flow across some of the quieter months.

Be PREPARED

Online shopping is easy. Retailers need to make in-store experiences easy too. People are stressed and time poor, especially during the festive season, so be as prepared as possible to streamline their experience -

and don’t make them wait.

Things as simple as keeping up the receipt paper in your POS, having extra staff on, and providing gift bags are going to make the experience easier and more enjoyable for consumers.

Philip Reichelt is the Director of Tenant Leasing Group. With over 20 years of experience in the Australian property market, Phil specialises in advising & representing retail, commercial & industrial tenants, and managing transactions from end-end. A credible industry commentator, Phil loves working with established institutions as well as ambitious brands breaking ground in new markets.

Connect with Phil on LinkedIn.

This article first appeared on LinkedIn.

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5 Steps to Turn Your Restaurant into an Advanced Distribution Centre

A couple of our clients are Food & Beverage, so we’re always on the lookout for quality sites that are fit for purpose. Increasingly, third party food delivery services are a consideration for restaurateurs, and how their site space is laid out and managed. Recent research shows that Australians are spending $2.6 billion each year on food and drink delivery through companies such as Menulog, UberEats, Deliveroo and Foodora.  The survey found about one-third of adults living in capital cities are food delivery users, and spend an average of $1600 a year.  

The online food delivery services market is now worth 12 per cent of sales of the lucrative $44.1 billion cafe, restaurant and takeaway food services industry. Takeaway sales as a whole have also grown by 18 per cent in just three years, according to the Australian Bureau of Statistics. It’s safe to say it’s a huge trend and it isn’t going anywhere.

Saying all this, it’s clear that food delivery platforms aren’t for everyone, and that there are a range of alternatives. Hospitality expert Wendy Hargreaves of FiveOfTheBest.com offers some astute observations from her experiences with restaurateurs entering the third party delivery game. But the bottom line is that having a read and evaluating what’s best for your business - placing considerations into cost structures, strategic location, and alternative delivery options - is key to outcomes.

If you do decide to go the third party delivery route, there are some key factors you ought to consider to ensure the effective balancing of an online order stream with your in-restaurant dining experience.

1. Your restaurant customers are still of the utmost importance

Third party delivery services provide huge opportunities for small businesses but that shouldn’t come at the expense of your in-restaurant dining experience.

Moreover, when you take out the 30% commission that some delivery platforms charge, theability to sell alcohol and maybe upsell some dessert - you can see how when presented with an online customer vs. someone in-store, the latter may be more valuable.

To the best of your ability make sure the delivery orders don’t hinder their experience. Keep yelling order numbers to a minimum, ask riders to remove their helmets, and don’t ignore customers because of app-demands.

2. Be kind to your drivers

You need drivers to accept your orders for the system to work and they need to make money. If something is taking a little longer than expected and they are becoming wary, don’t get upset with them. Instead, offer them some water, let them use the bathroom, and

feel good that you have done the right thing.

It’s also important for your in-house customers to see you treat drivers professionally.

3. Try having an alternative entrance

We’re looking for sites that allow an optimal dining experience in the front and a reasonable distribution out the back for our clients.  The delivery trend isn’t going anywhere so set yourself up for success in the hospitality industry by looking for a place that can meet your needs. Successful restaurateur Troy McDonagh put this into practice with “store design to ensure we have

fully integrated delivery and take-away [systems in place] without diminishing the dining experience”.

4. Diversify

Many people are now running ‘virtual restaurants’: takeaway shops that operate out of a kitchen, and purely service online customers. There are over 150 of these virtual restaurants on Uber Eats in Australia. The key insight that has enabled these restaurants to emerge is data from delivery apps like Deliveroo that has identified customer demand in underserved areas to reduce risk for restaurants.

Look online and see what isn’t available in your area - it may present opportunities.

Consider diversifying your product range to reflect what online orderers are demanding - if you run a pasta place but reckon you can make a mean burger, and there's a market for it, why not give it a go? The apps can provide opportunities to expand your offering and acquire new customers.

5. Negotiate

If you’ve completed the first four steps, it’s not impossible that a large portion of your business is now a well-oiled machine delivering boxed-up versions of your favourite foods to neighborhood couches everywhere. But if your restaurant is thriving, and in-house customers don’t feel like they have to sit in the middle of the running of the bulls just to get dinner,

it’s still important to manage & optimise your delivery service arrangement.

If you’ve been signed up to a number of delivery services for a couple of years, review your setup. As a professional negotiator I know the power of leverage, and I can tell you you’ve got it! The margins delivery services charge small businesses are huge and eat into a large portion of the profits, and it’s completely within your rights to call a representative and ask for a reduction in fees. Especially if you have multiple locations - large publicly listed companies certainly aren’t paying the full rate...

Philip Reichelt is the Director of Tenant Leasing Group. With over 20 years of experience in the Australian property market, Phil specialises in advising & representing retail, commercial & industrial tenants, and managing transactions from end-end. A credible industry commentator, Phil loves working with established institutions as well as ambitious brands breaking ground in new markets.

Connect with Phil on LinkedIn.

This article first appeared on LinkedIn.

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3 Key Themes in Retail for 2018

This article first appeared on LinkedIn on May 18th, 2018.

Retail is an exciting, dynamic space, and has been for some time. Be it the arrival of online retailers (the big story late last year being Amazon), trying economic conditions, or changing consumer habits and expectations — there’s a lot going on, and retailers have been forced to react.

New research from CBRE says the sales environment is “soft yet stable”. And they’re not the only voice making positive noises — see JLL, MSCI, GPT & Scentre, and the retail heavyweights praising the Federal Government’s 2018 budget.

MSCI’s Global Real Estate Research Vice President Bryan Reid has said, that

“despite the proliferation of negative headlines, despite the continued growth and share of e-commerce, retail returns have been quite resilient”.

The budget has boosted consumer confidence — there’s no denying that, as confidence has risen for the fifth straight week in the wake of income tax cuts. Retail’s resilience in this era of online retailing and economic instability is interesting, and is proving to be full of opportunity. JLL’s Director of Retail Research, Andrew Quillfeldt, has remarked on this period of adjustment (that looks now to be buoyed by cyclical drivers of retail spending showing positive signs of a recovery in the short-term) saying retailers are continuing to revise & optimise their business models

“to reflect the globalisation of retail, changes in technology, changing consumer preferences and trends between generations”.

I’m going to take a quick look at three key themes within Australian retail — rationalisation & relocation, experiential shopping, and new sales mechanics — that reflect these broader changes.

Rationalisations and relocations

Rationalisations and relocations are two of the key drivers behind high-volumes of shopping centre transactions (and other property moves), as retailers seek to reduce their rental costs and improve sales performance. ANZ senior economist Jo Masters has said this shows retailers are adapting to fundamental changes facing the industry — one being that rental cost pressures are unlikely to ease in the near future (although there are examplesof this happening in some CBD locations). The Australian Retail Association’s (ARA) Russell Zimmerman concurs that rationalising store networks makes sense, and suggests landlords may not have “really comes to grips” with this new turn in retailer strategy. Competition between shopping centres is only increasing — as retailers also look to relocate to better performing centres with a stronger trading profile or more dominant position within their catchment.

It’s no wonder 2017 was the second highest transaction year on record, at $8.8 billion.

Moreover, the shift towards development of non-CBD alternatives for commercial, retail and residential space is becoming more pronounced. Green Square in Sydney is anticipated to bethe most densely populated region in Australia, after the completion of the $1.7 billion Green Square Town Centre — Australia’s largest urban renewal project. Property development and investment group Tipalea Partners is soon to unveil a new $90 million project close by in Alexandria, describing it as a real alternative to Surry Hills and the Sydney CBD, with significantly lower occupancy costs (60% of those in the CBD), whilst providing better amenity than nearby Mascot. Tipalea’s 9,300 square metres of retail and commercial space (billed to expand to encompass hotel, industrial and residential) is just one example of the trend towards relocation, and re-purposing, that is being recognised by developers and tenants alike.

Experiential Retail

Experiential shopping — and a broader reconceptualisation of traditional ‘bricks and mortar’ retail experience — is part of a range of solutions being adopted by retailers as part of their repositioning in the era of online retail, and is also a key consideration for shopping centres as they to rebalance their portfolios. Melbourne’s Chadstone Shopping Centre is an exemplar of dynamism and creativity required to succeed against the game-changing challenges from online shopping and evolving consumer behaviour. The centre has been doubling sales every decade for the past 30 years in its evolution from a popular suburban shopping complex largely to an international fashion hub and tourist destination with a hotel, convention centre, cinemas and high-end restaurants -

today Chadstone announced annual sales of more than $2 billion, a record for Australia

and one of the world’s top five malls behind middle eastern and US retailing meccas. The strategic focus of the centre is to

“put more pizzazz into its plazas with designs, events and variety that makes it a destination in itself”.

Chadstone recently completed a $660 million development, which includes a hotel, new food atrium, Piazza, and more luxury retailers, and has a $220 million new development planned. This kind of development is consistent with research findings that show the persistent value of experience-oriented tenants — be they movie theatres, restaurants or gyms — as well as non-discretionary spend tenancies, like supermarkets and healthcare centres — in the age of online retailing. Interestingly, healthcare is one industry that isn’tfeatured on a US chart of the Top 20 Tenant Industries within Retail properties in this article by MSCI. Healthcare tenants bring a necessarily experiential & non-discretionary offering to retail environments — it’s no wonder that healthcare property outperformed retail, offices and industrial in 2017. Strong & ageing population growth, and the corresponding increased desire for use of healthcare services, are strong fundamentals shaping the future of the healthcare space — it’s one of the sectors to watch this year. Another experience-oriented alternative asset class is student accommodation, which has grown in popularity immensely in the last 4 years. Overall — it’s clear that

the anchor tenant of yesterday may well not be the anchor tenant of tomorrow,

as retailers and shopping centres reposition their offerings as part of the structural adjustment associated with the shift to online.

New Sales Mechanics

New sales processes and means of engaging with consumers, are also growing as retailers continue to adapt to an increasingly digital, ‘always-on’ & user-experience (UX) focused customer base. The Australian Retail Insights Survey 2018 showed that social mediasuddenly jumped to become a top-3 priorityfor retailers and brands alike — with spending on social video increasing by 49% as just one example of the broad shift towards engaging customers through social content. Another (unsurprising) finding is that

70% of companies that reported better than average sales growth have fast fulfilment EDI.

What is surprising, however, is that more than half of all companies haveno plans for ship-to-store (Click & Collect), which is popular with retailers due to the 75% chance of additional purchase during pick up. But more importantly reflects the changing purchase-habits of an increasingly connected and discerning consumer. Also, only 19% of retailers have full visibility to in trading partner warehouses and distribution centres, while almost 40% have partial visibility — pressing the question of just how important automation & robotics in warehouse operations will become as retailers continue to compete. As Rob O’Byrne from the Logistics Bureau writes, “The benefits of these tools are principally in the acceleration and increased efficiency of operations, plus improved tracking and inventory optimisation”. But it’s also a question of customer expectations — people increasingly won’t put up with a poor purchase experience (be that in terms of availability, e-commerce UX, delivery, or pick-up options), because increasingly they know they don’t have to.

That’s my two-cents on some of the big themes I see shaping up Retail in 2018. If you got value out of this market breakdown, feel free to share the link to this article with colleagues, clients or whoever!

Philip Reichelt is the Director of Tenant Leasing Group. With over 20 years of experience in the Australian property market, Phil specialises in advising & representing retail, commercial & industrial tenants, and managing transactions from end-end. He is a credible industry commentator and loves working with ambitious brands breaking ground in new markets.

Connect with Phil on LinkedIn.

Read this article on LinkedIn, Medium or Quora.

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Why do we hear so much about swanky San Fran ‘campus-style’ office spaces?

This article first appeared on LinkedIn.

Before Bitcoin there were shares — think Microsoft, Apple, Google. Many of us have heard about an old friend or acquaintance, call him Frank, ‘who took a punt in the early 00’s and has two yachts now’�� And while the air-time these tech-giants get may have been somewhat encroached upon by crypto, their size & influence — as creators of products, ideas, and new ways of working — remains indisputable.

Tech-giants are a big deal. They’re huge — it’s no small thanks to Silicon Valley & San Fran that California is one of the biggest economies in the world — grossing $US2.747 trillion. And they’re also pioneers and trend-setters. Not only was California the birthplace of ‘the pokies’ (the fellas who really knew how to make money), but it’s also the place that popularised ‘campus-style’ offices — thanks Google — where employees have access to more services & recreational features than you can poke a stick at. Googleplex is famous for having it’s own bus service, restaurants, bike network, courtyards & fun-slides…

Over the past decade, anyone who’s had anything to do with the commercial property space — either as a tenant, agent, or tenant representative — has been inundated with slick videos, images & articles showcasing these sorts of ‘business campuses’, ‘new concept business precincts’, and ‘campus-style’ office spaces. So really,

it’s no wonder we all feel a bit of San Fran’s magnetic pull.

And it’s hard not to idolise the Cali lifestyle — tanned blokes running trails in the sunshine and girls sipping green juice by the pool wearing vintage white sunnies are images that come to mind reflecting on the West Coast. But the ideas of ‘campus-style office environments’and ‘next-gen business precincts’ that we’re frequently asked to buy into, don’t sit quite right.

Asides from broader environmental and economic concerns about campus-style developments, places like Google’s Mountain View campus, which for all it’s fun is located half an hour’s drive from San Jose, and an hour and fifteen minutes from San Francisco, just aren’t practical in most cases in Australia. Here, a thirty kilometre public transport radius around our major cities is the defining factor in where most young professionals live and work. For small-to-medium businesses specifically, your lease is an investment into your business, and reality of a dense inner-business district in most of our major cities is something that should be considered. Whether it be office, commercial, or even retail,

you should be aware of scale and put in what’s going to get you the best, realistic return.

Being a Tenant Representative, I’ve had years of experience understanding what small-to-medium scale businesses are looking for in property. I love my work, and it’s even better when they are as excited as me about finding & nailing down space. But it’s my business to help save them money, so when I get asked about a ‘two-storey office with a cafeteria and a waterslide for a tech-start up in Melbourne’, I’m cautious.

On our East coast, work is concentrated in bustling urban centres. Our CBD’s are tight-packed with high-rise office buildings and boutique café’s. Our suburbs have rigorous zoning & development rules. Sydney and Melbourne in particular are restricted by space, which has seen prime net rents rise, with infill developments becoming much more common.

But there are serious advantages to our cities’ density, which tenants can make the most of. For instance:

when I need to talk to a business about renewal vs. relocation, I can walk from my office in Martin Place to theirs in Barangaroo AND pick up some coffees on the way.

Sydney and Melbourne are small, densely populated hubs of professional services — and it helps us all. For professionals, in particular those making crucial decisions about work spaces for teams, I think it’s so important to embrace the logistical blessings of Australian capital-cities. One emergent office solution that does this — by situating tenants centrally while integrating the ideas seen in larger ‘campus-style’ developments are Co-Working spaces.

When considering moving or developing spaces, think back to that return on investment:

is cost going to be returned to your business through increased productivity?

In retail there’s always been the dollars per square metre efficiency measure — a no-brainer. Office space should be researched with the same rigour, with a mind to determining the real returns on a given redesign, fit-out, or relocation.

This being said, of course there are important principles that can, and should, be adopted from the ‘campus-style office’ and similar narratives. Getting the best out of people should be a top-priority, and this involves considering, as the Harvard Business Review elaborates:how a “space’s design helps or hurts performance”, the right levels of “density, proximity of people” and “the importance of face-to-face interactions”, among other things. What adopting these best-practice designs looks like at a small business level of course isn’t what it’s going to look like at Google. But two campus-style qualities that can be practically adopted in high-rise offices are: communal eating areas & collaborative work spaces. Think simply;

you don’t have to build a café, but try a coffee machine;

have a kitchen space with snacks so people can keep their energy levels up without having to leave the office — you don’t need a full-suite of restaurants (and the chances are that you’ve probably got those in metres walking distance from your building’s front door anyway). Assign teams to the to work on projects in common spaces more often — the boardroom will do.

And as for a Google-style courtyard — in Sydney you’ve got Hyde Park and Circular Quay at your fingertips.

I think it’s great to have a more collaborative forward-thinking approach to new office sites, but I also think

it’s important to make the most of what our cities are: close-knit, connected and beautiful.

Clearly the ‘business campus’ approach isn’t a viable option for most businesses in Australia, especially smaller ones. And in our competitive commercial world, I do think we should be cautious about aspiring to ‘campus-style’ office environments that have been exported out of the US, at risk of not getting the best out of what our own cities have to offer, and failing to ensure the most cost-effective investments in office space for our businesses. We’ve got some great things going on right here, in our own backyard. Our CBD’s are known for their financial and professional services, and the management of our big brands — and staying within this proximity is far more important to me and my business, and many others, than having more space elsewhere.

So, to return to my initial question — why do we gush so much about San Fran and it’s ‘campus-style’ offices & vision of work? Maybe it’s as simple as just being one of those things — not achievable for most of us but slightly more exciting than our own everyday lives:

like watching Masterchef contestants make an earl grey infused Crème Brûlée with popped Tuscan rice and smoked pineapple while you tuck into your Sara Lee sticky date on a Sunday night.

Philip Reichelt is the Director of Tenant Leasing Group. With over 20 years of experience in the Australian property market, Phil specialises in advising & representing retail, commercial & industrial tenants, and managing transactions from end-end. A credible industry commentator, Phil loves handling lease-work for established institutions as well as ambitious brands breaking ground in new markets.

Connect with Phil on LinkedIn.

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