It is not a new concept that consumers now value unique and memorable experiences. The delivery of experiential and destination retailing to meet these evolving consumer needs has been at the forefront of tenancy profile negotiations and centre expansions around the country. One of the stand out sub sectors within retail has been the strong growth in Food and Beverage (F&B).
The growth in floorspace dedicated to F&B in recent years is evident in many of the refurbishments and extensions occurring in regional shopping centres. Department stores such as David Jones (which has experienced declining profits in recent years), are responding to the rapidly changing retail environment, with plans to integrate food concept stores into some of their locations across Sydney and Melbourne. Their first stand-alone gourmet food store proposed for 2019 is located within the Capitol Grand development positioned along Chapel Street in Melbourne’s South Yarra.
These concept stores focus on supplying locally sourced products and food-to-go offerings. The success of these concept stores is demonstrated by the recent refurbishment of its flagship Food Hall in Bondi Junction.
The growth of F&B is not limited to larger regional shopping centres though with neighbourhood centres also increasing their emphasis on this sub sector.
Neighbourhood centres hold a unique ability to create local village environments for communities. The popularity of these assets was evident in 2017, dominating transactions within the Australian retail market, with Queensland particularly accounting for a disproportionate amount of the activity. In the current challenging retail environment, neighbourhood centres present an opportunity for property syndicates and unlisted funds to redevelop and further enhance asset performance and valuations.
The strategic creation of F&B precincts can be a valuable addition to existing neighbourhood centres for several reasons:
1 The ability to increase customer dwell times, flowing through to increased customer spend.
2 An increased ability to attract activity to the centre through longer trading times, capitalising on the ‘night-time economy’.
3 An improved ability to increase repeat visitation, rather than the historic large weekly grocery trip.
4 Neighbourhood centres are generally characterised as offering community convenience. As our population continues to grow and we continue to move towards greater levels of urban densification, consumers will increasingly value the convenience that these centres offer for their dining needs.
5 Activation of these assets at core times can encourage greater levels of cross promotion between F&B tenants and other centre retailers. The greater the overall centre trade levels, the more demand and control landlords will have in choosing prospective tenancies that will strategically enhance the overall centre.
6 Quality F&B tenants require higher levels of capital expenditure (fit out costs), which landlords may contribute towards through the provision of incentives. At a first glance this may be viewed negatively, however it can allow the negotiation of longer term leases, which in turn creates improved income security.
If neighbourhood centres are to continue to evolve and remain hubs for the local community, they need to effectively respond to evolving consumer habits and values. It is evident that a strategic and considered F&B offering as part of a neighbourhood centre can deliver a convenient offering to consumers, create additional reasons for regular patronage, and ensure the ongoing performance of neighbourhood centres within the Australian retail landscape.