For many Sydneysiders the ‘great Australian dream’ of a quarter acre block in the suburbs is a long forgotten fantasy as inner city residents choose location over size. As we increasingly embrace medium and high density housing, this has had significant effects on the way we work, shop and live. For retailers, one of the most pressing challenges is how to attract and keep modern customers when a world of online shopping is available with the mere click of a mouse or swipe of the screen.
(Image: Central Park, Chippendale, Sydney)
In the ongoing search for connectivity in a fast-paced world with less social interaction, consumers desire human connection and socialisation. High street and community shopping is enjoying a resurgence as people pursue a vibrant village atmosphere and the local high street or strip shops are the neighbourhood gathering of 2017.
Modern consumers seeking interaction and connectivity, which alongside the desire to be a part of ‘the next big thing’ is driving experiential and mixed use retail. Mixed use retail and lively high streets are, in part, also in response to increasingly compact living spaces that are impractical for entertaining.
So what does this mean for commercial real estate?
Savvy developers are ensuring they capitalise and play their role as placemakers, creating attractive standalone destinations. By using quality retail as an anchor to residential developments mini communities are created that are enticing to both occupy and visit.
Head of Research Dominic Brown says “With an apartment tower and space below you effectively create a vertical community. The retail offers more than convenience; the right tenant emphasises that local village atmosphere and occupiers buy into the concept of a café where the barista knows their order, or bank where the teller knows their name”
The natural solution for residential adjacent retail is convenience retailing, however any business offering something the internet can’t is ideal. An experience or service element which is not appealing or available for online purchase will be well received by any resident.
Ideally, as well as benefiting the community, a retailer should complement the resident’s lives, rather than infringe on them. Considerations must be made regarding potential noise, traffic and garbage and should be weighted in selecting an appropriate tenant or retail occupant, so as not to irritate residents.
Matt Hudson, Head of Retail Leasing commented “retail located within or adjacent to residential developments are some of Sydney’s most hotly contested leasing opportunities”.
Matt secured 320sqm for Priceline Pharmacy in in the tightly held Potts Point, directly underneath the REX apartment complex on MacLeay Street. Shortly following this successful leasing transaction, the owner traded the asset at a sub 5% yield, leveraging the lease term and quality tenant.
For investors, acquiring leased strata retail is key to minimising risk. Secure, blue chip tenants with long term leasing covenants that have already undertaken potentially costly and time consuming fit outs and negotiations are optimal.
When investing in strata retail in a mixed use development, if possible seek assets that sit on a separate stratum. This will limit potential conflicts with the residential occupants, and allow for additional flexibility. Anthony Bray, Director, Sales and Investments commented “The pinnacle of strata retail combines A-grade tenants, in new premises on long term leases located in exceptional high street locations. These types of assets are usually passed down generation to generation and are rarely marketed”.
(Image: 1/270 Liverpool Road, Ashfield, Sydney)
Cushman & Wakefield are offering for sale Lot 1 and 2 at 270 Liverpool Road Ashfield, comprising 2 brand new strata retail stores tenanted by ANZ Bank and Chemist Warehouse. The owner shared why the property was of interest to a range of high quality organisations. “The location, next to a mall with significant foot traffic, directly below residential in a vibrant and rapidly expanding area held obvious appeal. The flexibility of a brand-new space allowed ANZ Bank and Chemist Warehouse to undertake creative fitouts that cater to customer experience.
The owner continued, “For us the appeal of ANZ Bank and Chemist Warehouse was clear. Chemist Warehouse are Australia’s largest pharmacy retailer with over 300 stores, and ANZ Bank is one of the world’s largest banks, the security that provides us as landlords is undeniable. In addition, it was important to us to select tenants that would be well received by the local community. Despite their corporate status the management and interaction with these tenants is low, a true ‘set and forget’ asset. Additionally, we specifically designed these 2 shops to be held in a separate stratum to the residential units, meaning the shops are separately metered, reducing the levies and outgoing”.
The properties are to be sold separately and will be auctioned Tuesday 5th December 2017 at the Cushman & Wakefield Sydney office.
For more information, contact Anthony Bray
p) +61 419 322 233