Disruption. There is no doubt this is one of the most used words in our industry today, with good reason. As we move into what is regarded as the ‘fourth industrial revolution’, disruption extends beyond the impact of technology and social media, to how we respond to ever accelerating social and economic shifts and emerging consumer trends, to attract the hearts and minds of our customers. It is at this point that we need to take stock, have clarity of our purpose and clarity about the role shopping centres play in this world of disruption.
As the largest direct real estate fund manager in Australia and one of the largest in Asia Pacific, AMP Capital creates exceptional experiences that deliver sustainable outperformance for clients. We know that experience and investment performance are not mutually exclusive, and as an active manager of shopping centre assets, we recognise the role all our stakeholders play in the value chain – from partnering with our retailers and our commitment to supporting them in their success, to understanding the need to deliver sustainable investment returns for our clients. Yet fundamentally, we understand our customers and the communities of our shopping centres and we believe in delivering places and experiences that inspire people to connect.
It’s this human connection that continues to be a driver for visitation. Our research reinforces the notion that shopping centres are as much a place for social gathering as they are a place of commerce. Naturally, customers want a place where they want to spend their time, and so customers are drawn to the most exciting retail experience, just as they are drawn to the easiest experience.
A great advantage we have at AMP Capital is our access to global insights and emerging trends and ideas. Our ongoing focus is to actively respond to these opportunities and apply our thinking to our clients’ portfolio of shopping centres to ensure their assets continue to evolve and remain relevant now and into the future.
Investing in millennials
Understanding our next cohort of shoppers – millennials – is crucial to the long-term success of bricks-and-mortar retail. Our research shows that by 2030, over 60% of the retail spend will be controlled by millennials. Millennials already control a large amount of wealth, with those at the older end of the cohort approaching their peak earning period, so it is incredibly important that both shopping centres and retailers do everything they can to lock them in as loyal customers now.
This group of shoppers has different expectations and preferences to its predecessors. They care deeply about the environment, sustainability and social justice, and want to support businesses which have shared values which they put into practice. This age group reports feeling personally powerless to effect change, and they look to large organisations such as shopping centre owners and retailer groups to set the example and work to create meaningful change in the community, especially through initiatives like energy saving and recycling programs.
A great example of a retailer embracing these issues is Woolworths at Marrickville Metro in Sydney, which in January opened its newest flagship store, featuring a revamped fresh food section where ‘living lettuce’ continues to grow until you place it in your shopping trolley. In addition, the new store uses LED lights to reduce power usage, has carbon-efficient refrigeration and air-conditioning systems and a dedicated area in-store where customers can bring in their soft plastics to be recycled.
While millennials are often credited as being the ‘digital generation’, they are still social creatures drawn to bricks-and-mortar shopping centres that facilitate face-to-face interactions and connections. This is supported by findings from the AMPCSC Recommended Retail Practice Report 2017 which found that 87% of millennials like or love shopping in-store, and that they view shopping as a social experience, often shopping in groups or with friends. So, while this group is more digitally connected than ever before, exchanges that happen offline are just as important as those that happen online. So how do we engage with them in a way that will feel meaningful, while also capturing their spending and responding to their needs?
Indooroopilly Shopping Centre in Brisbane has recently introduced initiatives such as “The Ultimate Man Cave”, where shoppers could experience free men’s style sessions and visit an in-house barber, with craft beer and whisky tastings available, which was a hit with male customers. A Student Hub has also been introduced during key study periods where university and high school students can study in wifi connected space, and we are working with a gaming retailer to develop an in-centre ‘gaming stadium’ where our young customers ‘hang out’ in a dedicated space that showcases the most popular new games and technology.
The next revolution
“Humanity will change more in the next 20 years than in all of human history” – Gerd Leonhard
The fourth industrial revolution is well underway. Globally, we are entering a period of heavy transition, where the way we live, work and play is transforming rapidly as the pace of technological change accelerates. As this revolution takes place, there are opportunities for and risks to the economy.
The key drivers of this fourth revolution will be:
• Demographic transformation
• Economic power shift
• A bigger middle class
• Climate change
• Rapid technological change
Of all of these factors, we believe the most significant drivers will be the rapid pace of change in technology and the increasing urbanisation of our cities. The rate and pace of change in technology is now reaching a stage where it is almost incalculable. Over the past 10 years since the iPhone was first launched, we have seen the emergence of new, billion-dollar industries – industries with which we can interact from the palm of our hands. Facebook, Uber and AirBnb have multi-billion-dollar valuations that didn’t exist a decade ago. We can only assume that there are platforms being built now that will produce the next wave of technology-driven value creation. Artificial intelligence, supercomputing and logistics services will all play a significant role in this growth.
From a retail perspective, while everyone is focused on the risks of technology and growth in ecommerce spend, a world without bricks-and-mortar retail is unlikely, as online retailers move from pure online play to multi-channel. The reasons for this are multifaceted, but as we look into the future, the demand for physical space from online retailers will rise as they seek new ways to improve their accessibility to customers, and create more meaningful connections beyond a website experience. Our research shows that despite the efficiency benefits of online retail and delivery, consumers across all categories prefer in-person retail experiences. The opportunity and challenge for owners of retail space is creating a compelling proposition to attract online retailers into the bricks-and-mortar space, and get a slice of that strong growth in online retail spending.
Urbanisation and the increasing density of cities and inner urban areas ties in neatly with this transformation in technology. By 2030, two thirds of the global population will live in cities. Australia is moving away from the suburban dream of previous generations toward a more European, Asian model of higher density, smaller spaces, as people move to be closer to their work and transport infrastructure. This will lead to a dramatic shift in the needs and demands of consumers who occupy these new mega-cities. Around the clock, 24-hour accessibility convenience services like food and beverage, and social precincts such as parks, gardens and entertainment quarters will see stronger demand from this structural shift. Shopping centres will also adapt, becoming centres of social infrastructure, offering traditional food, beverage and fashion offerings, but also adding social services such as child care, medical centres, education and logistics, last mile pick-up zones.
Much like the phone which has changed in the past decade, the mall of the future will look significantly different to the centres we experience today, creating opportunities for income and value growth while improving the standard of living within our communities as they adapt and change.
Looking more broadly, we are seeing some strong, emerging macro trends that will revolutionise our industry. These are trends we seek to better understand and we are investing in that effort. More importantly, we are focused on how we adapt our total offer beyond the traditional model of getting the right retail mix in the right location.
In summary, experience will continue to be a key factor in building successful shopping centre environments, beyond just experience-based tenants. Despite the current period of disruption, we know that the desire to connect socially will continue to drive consumers into shopping centres. If we continue to stay true to our purpose of delivering places and experiences that inspire people to connect, and if we embrace the opportunities that lie ahead, our shopping centres will continue to be successful for many decades into the future.
AMP Capital is dedicated to creating exceptional real estate experiences for shoppers, customers and clients, drawing on over 50 years of experience in shaping city skylines and creating iconic shopping centres.
With $26 billion in real estate assets under management for investors, including almost $10 billion of shopping centre assets, AMP Capital’s specialist shopping centres team creates inspiring shopping centre experiences for 168 million visitations every year. Our 300-strong team manages a portfolio of 33 shopping centres around Australia and New Zealand, from every-day neighbourhood to large, super-regional centres, generating over $8.5 billion in sales and featuring over 4800 local, national and global retailers.
We aim to be a world-class property and development team delivering significant value to clients, applying deep and broad specialist expertise across retail disciplines, including property and asset management, development, leasing, marketing, research, placemaking and retail design.
This underpins our long and successful track-record along with extensive research and a comprehensive knowledge of the shopping centre industry which backs every decision we take to create great experiences and sustainable, profitable outcomes for our investors.