Slow progress on retail expansions

The recent approval for an estimated $450 million expansion of Westfield Whitford City has added to a long line of shopping centre redevelopments proposed in Perth, although ongoing economic uncertainty is casting doubt on how many will actually go ahead.

In late October, the metropolitan north-west development assessment panel gave the green light to Scentre Group for its proposed million revamp of Whitford City, a plan that would add 27,000 square metres of retail space and also incorporate up to 739 apartments on the surrounding land.

However, receiving planning approval is not necessarily a guarantee the development will proceed.

Scentre Group has been sitting on an approval to expand its Westfield Carousel shopping centre for nearly 12 months, while it is also planning a $450 million redevelopment at Westfield Innaloo.

But none of its expansion projects appear in its current development pipeline, which is valued at $2 billion, according to a third quarter update lodged with the Australian Securities Exchange early last month.

Instead, Scentre Group said it was undertaking pre-development activity for the expansions, which are part of $3 billion worth of redevelopments across the country.

It is a similar story for Vicinity Centres, formerly Federation Centres, which is planning redevelopments at Mandurah Forum and Galleria Shopping Centre, with a total value of $770 million.

Vicinity, which is in the middle of a $52 million expansion of its Halls Head Central shopping centre, said it was expecting to begin the redevelopment of Mandurah Forum in the 2016 financial year, but the $420 million revamp of Galleria is not scheduled to begin until FY2018 or beyond.

AMP Capital has also proposed massive extensions at both its Garden City Booragoon and Karrinyup Shopping Centre properties, with those plans totalling an additional 100,000sqm of retail space with a $1.35 billion value.

However, like Scentre and Vicinity, there is no clear timetable for AMP Capital’s redevelopments.

In all, there are nine major centres with major revamps planned, which would add 335,637sqm of extra space proposed at nine suburban malls.

All that extra space needs to be filled by shops, which is looming as a daunting proposition.

Scentre Group’s update showed Western Australia was the only state in the country to record negative growth in specialty sales across its malls in the 12 months to the end of September, with a 2.4 per cent reduction.

Chief executive of retail leasing specialist Metier, Darryl Ashworth, told Business News he estimated that, if 60 per cent of the proposals were to go ahead, an additional 3,000 shops would be needed to fill them.

While Mr Ashworth acknowledged there was huge potential for growth in food and beverage, with shopping centre owners looking at considerable hospitality expansions, he said consumers were consistently spending less on discretionary items like fashion, shoes and accessories.

“People are putting much more emphasis on catching up for a drink than buying a new shirt,” Mr Ashworth said.

Attracting large international retailers that take up much more space than traditional shops, such as H&M, Zara or Topshop, was also an option for centre owners to fill out their malls, but Mr Ashworth said that strategy presented its own challenges.

He said growth of the internationals was restricted, because in Perth they would have to pay double the rent they would in other major cities around the world, while at the same time not earning as much revenue as at other locations.

The other factor restricting retail growth, Mr Ashworth said, was wages, with an 18-year-old worker in Perth potentially earning the same wage as a regional manager in New York.

“International brands don’t fully grasp, until it’s too late, how much it costs to operate here,” Mr Ashworth said.