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36 BUSINESS THROUGH INNOVATION RETAIL MANAGEMENT HSHOPPING CENTRE LANDLORDS CHANGE THEIR FOCUS ousehold spending is giving the economy the push it needs to quickly move to full recovery. In this positive environment landlords are moving to change their focus to strengthen their assets. A sustained economy recovery is evident after two consecutive quarters of more than three per cent growth fuelled by surging consumption and business investment despite the withdrawal of more than half the federal government’s stimulus contributions. The Australian economy is now within two per cent of its pre-pandemic level of output, and in a further significant boost, private business investment rebounded 3.9 per cent in the December quarter, the second biggest quarterly increase since the mining boom in 2012, and dwelling investment jumped more than four per cent. Against this positive economic background, landlords are seeking to strengthen the value of their buildings. Along with some retailers, they are further restructuring to adapt to new shopping habits and how consumers use malls following the impacts of the pandemic. Scentre Group Westfield owner Scentre Group’s CEO, Peter Allen, recently said the company had an expectation of growth and was moving beyond simply being a landlord collecting rent, flagging moves such as membership programs and aggregated click-and-collect services for retailers. He added that Westfield was also focusing on serving customers rather than on big-ticket developments, having taken space from department stores and brought in new retailers and brands. Mr Allen sees Scentre Group as facilitating the connection between the consumer, retailers, brands and users, accelerating strategic customer initiatives such as the Westfield Plus membership program, which now has 1.2 million members. Vicinity Vicinity is another landlord that has shrunk stores in recent years to future proof malls, allocating space to new tenancies by downsizing areas where space is no longer required. Department stores are a great example. Landlords have traditionally facilitated longer department store leases but are now taking back this space to create smaller stores and shorter leases at higher rents. GPT Another large retail landlord, GPT continues to invest in retail, upweighting to growth categories and introducing new retail experiences, such as Australia’s largest high- ropes course, which opened at Sunshine Plaza in Maroochydore, Queensland last November. The $65 million all-of-centre modernisation at GPT’s Highpoint shopping centre in Melbourne is also aimed at improving the customer experience with its focus on amenities, art, technology landscaping and light. David Jones at Highpoint will transform its two-level retail space into a single- level tenancy with the reconfigured design to deliver a curated product mix that is specific to Highpoint customers. GPT is keen to liaise with its tenants to ensure they use the space in the best possible way. Such a standpoint could lead to the landlord taking back areas and replacing them with medical centres and flexible office space as more people opt to work closer to home. Kmart will come into Highpoint to occupy a level previously used by David Jones. Wesfarmers, which owns both Kmart and Target, will close its Target store at Highpoint. Like landlords, Wesfarmers, as a retailer, is reviewing its space allocation and store numbers and will swap tenancies where required. In 2020, Wesfarmers announced that more than 160 Target stores would close or be converted to Kmart stores. What this means for pharmacies Pharmacy operators have been in good shape during the Covid era. They have improved their value in the eyes of landlords, which continue to be on the back foot in the aftermath of the pandemic’s impact. While landlords are trying to attract more customers to improve their businesses, they still have a long way to go to resume their pre-pandemic trading performance levels. Pharmacy operators need constantly to monitor the performance of their retail environment, looking at the level of vacancies and of customer traffic that landlords are delivering to their specific retail area. If retail conditions have deteriorated, then this needs to be reflected in improved commercial terms. This may even involve a pharmacy operator moving to a different part of the shopping centre or building. References Cummins C, Johnason S. ‘Landlords adapt to new habits’. Sydney Morning Herald, 27/2/21. Wilmot B. ‘Westfield owner puts focus on customers’. The Australian, 25/2/21. Harley R. ‘Malls rebound but pandemic not the only issue’. AFR, 25/2/21. Lenaghan N. ‘Westfield owner holds its ground’. AFR, 25/2/21. Cranston M. ‘Household spending gives economy push to full recovery’. AFR, 4/3/21. By Bruce Engeman. Professional Property Advocate Engeman Retail Bruce Engeman is an independent, professional property advocate who works exclusively for pharmacy operators. He started Engeman Retail in 2008 and has handled pharmacy negotiations hundreds of times over the past six years. Inquiries: bmengeman@bigpond.com or 0418 470 175. RETAIL PHARMACY • MAY 2021