Australian real estate is currently hot property for international retailers.
In the last two to three years we’ve had a massive influx of global brands hit our shores and we can only expect this to continue for the next few years.
Some big brands will enter the market for the first time (Marks & Spencer, Debenhams and Banana Republic, for example) while already established names such as Sephora, H&M, Zara Home and Costco will continue to grow their presence with more stores across the nation.
According to CBRE, there are 130 brands interested in rolling their stores out to Australia and New Zealand for the first time in the next year, with a large percentage of these being mid-range fashion retailers.
While these brands typically aim for prime real estate in Sydney’s Pitt Street Mall or Bourke Street Mall in Melbourne when first entering the market, as time goes on we’re seeing them spread their presence to other capital cities and regional areas, and some even opening secondary stores in additional locations to meet the demand.
Here are nine reasons why Australian real estate is hot property for international retailers.
Low market penetration
In January this year, only thirty nine of the world’s top 250 retailers had operations in Australia. This is a saturation of 16 per cent and therefore the representation of international brands in the Australian retail market is quite low. For international retailers, this low penetration means a lower level of competition and increased returns, and we’re nowhere near the point of being oversaturated with global names anytime soon.
According to CBRE, an additional fifty global brands would need to roll out stores in Australia for our market to match the global brand penetration currently seen in China, Hong Kong or Singapore, and we would need an additional ninety brands to match the same penetration as Britain. This shows there’s still plenty of room in our market and retailers are jumping at the opportunity.
European and American growth prospects limited for international retailers
The European and North American retail markets are quite saturated with global brands, meaning opportunities for expansion there are becoming limited, so they’re looking to our shores as a new market. Australia is also a smaller market in comparison, potentially meaning an easier rollout and the ability to establish a notable presence sooner.
Resilient and healthy economy
On a global level, our economy is comparatively healthy and relatively stable, and is more sheltered from global happenings, as highlighted by the Global Financial Crisis from which we escaped relatively unscathed. This stability is appealing to international retailers looking for a new market.
We love to shop
There’s no secret about it – Australians love to shop. Whether it’s online or in store, we have solid spending habits over both platforms. Australians typically also have reasonable disposable incomes, allowing us to partake in this past time. Combine this with a positive level of consumer confidence and it’s no wonder global brands want to be part of our market.
Tourism levels in Australia are growing, particularly from Chinese tourists. Currently, 30 per cent of retail industry revenue can be attributed to tourism, so it makes sense that increased tourism equates to increased shopping and increased spending, and more opportunity for big brands looking to expand.
A new market for China
China currently has nine stores in the top 250 global retailers. Yet despite our close relationship and geographic proximity, none of these brands currently exist on Australian soil. But this is about to change. Alongside Chinese growth in residential and commercial office property investments, we will soon see Chinese retailers enter the retail market in a big way, most notably with online retail giants Alibaba and JD.com.
Currently, US-owned retailers dominate the foreign retail market here in Australia, accounting for about half of global brands represented, while French retailers come in second with an estimated 13 per cent share.
Strong demand for international products
There is a strong demand for global brands from Australian consumers. You only need to look at the lines in apple stores whenever a new iPhone is released or the queues to get into new H&M and Topshop stores when they launch to know they’re in demand.
Furthermore, Australians love to travel so many already have a strong exposure and connection to these brands and would love to have them more easily accessible in our own backyard.
We’re already buying online
Thanks to the rise of online shopping in the last decade, these global brands know without a doubt that we want their products – and that’s because we’re already buying them. And if we’re paying the overseas shipping costs to order online, it’s fair to say we’d support a traditional bricks and mortar store without the additional expense of delivery.
And thanks to our activity on their online shopping portals, international retailers already have access to our buying behaviour patterns and valuable demographic information; it’s primary market research that puts them in good stead to enter our market, as they already have an in-depth understanding of it.
A growing population
Australia has a growing population, and it’s currently growing faster than a lot of other markets. This is particularly true for cities and inner urban areas. And what does more people mean? More disposable income, more goods needed and more shopping – and an attractive market for international retailers looking for long term expansion options.