At Mirvac, we believe that we are a world leader in the creation and management of unique urban places. There’s a shift happening. Boundaries are blurring. Work is no longer what we do between 9 and 5, and leisure is no longer confined to the weekends. Digital interactions and physical connections are converging. People everywhere are looking for ways to live a seamlessly connected life.
Speaker: Justine Hughes, General Manager Retail, Mirvac Group
Reimagine urban life
It is in this context that Mirvac Group unveiled its new purpose – Reimagine Urban Life – our ‘reason for being’ last November. We believe we are at the forefront of reimagining the way Australian city dwellers live, work and shop. We are redefining the urban landscape and creating more sustainable, connected, fluid, more vibrant and more striking urban environments.
Speaker: Justine Hughes, General Manager Retail, Mirvac Group
In our urban cities, customers are seeking environments which reflect the changes in which they now live. The changing genetic make-up of our cities has given rise to a new Australian dream, where quality of living in a dense urban environment is measured by access to services, transport, parks and other social infrastructure.
Population growth in Australia is forecast to increase by 35% over the next 20 years to 32 million people in 2035. The majority of this growth is concentrated in the three major capital cities of Sydney, Melbourne and Brisbane. The drivers of population growth are intrinsically linked to employment and income growth. And ultimately it’s jobs and infrastructure that support cities and make for successful retail.
An urban retail powerhouse – Broadway Sydney
Since 2013, Mirvac Retail has been transforming its portfolio to reposition itself as an Urban Retail Powerhouse. Through acquisitions, divestments, remixing and redevelopments, we have successfully shifted the geographic parameters of our portfolio into an expanding collection of key urban assets across Sydney, South East Queensland and Melbourne.
In our urban cities, retail environments need to be agile, innovative, and relevant to the needs to their local community. At Broadway, the Level 2 precinct provided remixing, expansion and repositioning opportunity. Previously comprised of an outdated food court and underleveraged cinema precinct, level 2 has become repurposed into a truly urban experience. Fusion: Food and Fashion has been executed with the contrasting mix of desirable retail including Hoyts Lux, Sephora, Victoria’s Secret Beauty, Calvin Klein, Seed as well as popular food catering offers including Din Tai Fung, Bondi Pizza, Zeus Street Greek, Sushi Hon and others. Significantly, a portion of underutilised car park has been converted into a new international mini major, H&M. Our design and development teams have been committed to their vision of transforming Broadway into a premier urban destination, purposely different from traditional shopping centre design.
The resulting Level 2 is bold, vibrant, engaging and uniquely geographically and market relevant. Further, with Sydney’s night-time economy totalling $3.5 billion in 2014, an increase of 24% from the previous five years, the extension of Broadway’s trading hours to 8pm on Mondays to Wednesdays and Fridays, resonates with the local urban shopper.
It’s with a similar resolve that we approach one of our latest and most exciting acquisitions, Toombul Shopping Centre, located in Nundah, 8 kilometres from Brisbane CBD. The centre has been relatively untouched since 2003. We believe it is a ‘renovator’s delight’ in one of the best markets in Brisbane. Population growth in the Toombul catchment is indicated to be 2% per annum and forecast spending growth is 4.7% per annum.
Our vision for Toombul is to leverage its potential to be reimagined; to bring it into alignment with current market demands for retail uses and customer trends which will eventually include a casual lifestyle and dining precinct.
Experience Retail by Mirvac
Retail has always been about the economics of demand and supply. It’s just that the urban customer is now more knowledgeable and connected, with expectations greater than ever before. It’s no longer enough to provide products that are fit for purpose. In today’s urban landscape, where customers lead increasingly busy lives, they are seeking environments which enable them to maximise their leisure time and negotiate their seamless and connected lives.
At Mirvac Retail, we understand that ‘Experience’ has become the most fundamental currency of Retail. When we launched our new B2B brand last August, we identified that underlying our urban strategy is our focus on ensuring that every aspect of our customer journey, every touch point we have with our retailers, their customers and communities, is designed to create value by building deeper and more rewarding connections. To that extent, our new brand, Experience Retail by Mirvac is underpinned by our BASIC values – to be Bold, Agile, Smart, Innovative and Collaborative.
The experience economy
As the structure of the Australian economy continues to shift from agriculture and mining to services, well positioned and forward thinking ‘shopping centres’ are the beneficiary. For example, we have witnessed accelerated productivity growth of 14.8% in our food catering categories over the last two years to $11,695/m2. We have leveraged successfully the category up-weight at the recently opened Tramsheds, Broadway, Rhodes, Kawana, Orion, and Greenwood Plaza and identified further opportunities at Toombul and Birkenhead Point.
In addition to our focus on food catering, one of our most recent BASIC initiatives has been the introduction of our tourism strategy. Tourism expenditure across the three major eastern seaboard cities reached $34.5 billion in 2015, increasing by 32% in five years. Overnight visitors to these cities has reached 28.9 million, increasing by 28% in five years. In Sydney, tourism expenditure has reached $15.2 billion with 12.1 million overnight visitors per year in June 2015.
Harbourside and Birkenhead Point Outlet Centre with their harbour front locations are best positioned to benefit from increasing tourism expenditure. Both centres collaborated to launch ‘Hello Sydney!’, a partnership with iVenture card providing tourists with shopping offers across both centres. The platform has been successfully recognised nationally and overseas winning at both ICSC and SCCA Marketing Awards in 2016. We launched the Hello Sydney! Shopper Hopper, a partnership with Fantasea which now provides Sydney tourists the unique experience of reaching Birkenhead Point and Harbourside by ferry via the iconic Sydney Opera House and Harbour Bridge.
Those visiting Birkenhead Point later this year, they will be welcomed with the new precinct, Flinders Gallery. Development works are currently underway to create a premium and aspirational brand outlet experience against the backdrop of Sydney Harbour. Highly anticipated premium brands will join the existing line up which includes Armani, Hugo Boss, Furla and Polo Ralph Lauren.
Consumer driven retail evolution
Today’s shopper has become increasingly connected, informed and with an insatiable appetite for new technology. Simultaneously, today’s digital world has created a vacuum where people are craving authenticity, human contact and sensory experiences.
Futurist and author of ‘Digilogue’ Anders Sorman-Nilsson, describes the consumer as having a ‘digital’ mind and an ‘analogue’ heart. He highlights the valuable role which online and bricks-and-mortar stores play in today’s retail landscape and reflects that successful convergence is the ability to leverage digital channels to attract new customers and the use of high touch channels to build shopper loyalty. Sorman-Nilsson is of the view that digital disruption is only disruptive if you’re not adaptive.
The imminent entry of Amazon into the Australian marketplace presents Australian retailing with a market disruptor of such size and scale it has the potential to impact the majority of retail categories. Citi’s retail analyst, Craig Woolford forecasts Amazon to achieve 14% of all online sales and 1.1% of all Australian retailing within five years of launching. Against the threat of a disruptor competing on price and convenience, it is more critical than ever that retailers and shopping centre managers are able to adapt and leverage their ability to build brand loyalty and retention based on emotional connectivity.
Tramsheds is an asset that inspires emotional connectivity. It bears history, forged in Sydney’s transport legacy in 1904. It bears nostalgia and romance, restored from a dilapidated state from when it was closed in 1953 to its resurrection last September into an entirely contemporary new use, relevant and appropriate for today’s urban landscape. Tramsheds is nestled in the heart of Harold Park, Mirvac’s residential project. True innovation arrived with the retailers and restauranteurs who came on board and aligned with our vision to create a premier foodie destination in Sydney’s inner west. The precinct offers a local supermarket, experiential dining offers where customers can watch their pasta being hand-made and their coffee beans being roasted; as well as all the conveniences of a gym, medical centre and beauty services, all situated adjacent to Jubilee light rail station. It is this seamless integration of residential with retail, social infrastructure and transport which drew the admiration of Sydney Lord Mayor, Clover Moore, at its opening who proclaimed “this is how to do density!”
Tramsheds’ offer in its whole is experiential and successfully appeals to the socially connected consumer; whether they be local, interstate or international! It is positioned to ‘connect people to providores’ and has an ethos based on a shared love of food, education and community. Social media commentators have described Tramsheds as ‘epic,’ a ‘foodie paradise’ and its aesthetic as ‘magnificent’ and ‘photogenic’. They return with their smartphones to broadcast new discoveries to their followers on Instagram, Facebook, Twitter, Weibo, WhatsApp and others. This social connection is two-way and retailers are provided instant feedback and customer insight. Whether or not their latest offer appeals is broadcast immediately to the world. This dialogue, for the adaptive retailer drives competition, constant innovation and survival.
Despite a continuing backdrop of global uncertainty such as Brexit and the US election outcomes, and the much mooted ‘arrival’ of Amazon, we believe a number of economic fundamentals will benefit the capital cities in the eastern states of Australia, and point to another year of responsive and relevant retailing. Australia’s economy continues to prove resilient as growth continues to rebalance to the services sector, and if the lower AUD/USD remains, this should continue to support domestic consumption, along with strong inbound tourism as was seen last year.
However, recent retailer administrations highlight the need for both retailers and landlords to be agile in adapting to new trends and changing consumer behaviours, as integrating technology with the retail experience provides both challenges and opportunities. We believe there will be increasing sophistication in site selection and growing customisation of product offerings to local markets to ensure relevance and optimise productivity.
Nationally, labour market conditions remain mixed, along with low wage growth becoming the new norm. We see an offset for consumer spending with lower petrol prices and low mortgage rates continuing for much of 2017, as well as a falling savings ratios. Traditionally this points to the potential for increased retail spending, however this needs to be coupled with a diminishing ‘wealth factor’ from the moderating appreciation in house prices.
We consider that assets and portfolios which are positioned with the greatest exposure to capital cities in the eastern states will prove resilient and will continue to deliver favourable investment returns.