Whither the great Aussie shopping centre in 2021? In a very parlous state is the unfortunate answer, in most cases. COVID has thrust thousands of retailers onto struggle street and the outlook for landlords is gloomy.
But does it have to be this way? In the US and the UK, a build-to-rent property development boom has seen shopping centre owners busily repurposing space in the carpark to construct upscale, residential complexes, for more than a decade.
Developments are typically branded, single title and professionally managed. Offering a slew of amenities – think outdoor entertainment areas, swimming pools and gyms – allows landlords to position them as communities, and conveniently situated ones at that, given their proximity to nearby shops and restaurants.
Rents are at a modest premium or on par with private alternatives, with the added bonus of flexible terms. Some providers allow tenants to sign five year leases, while others let renters on the move transfer to a sister facility elsewhere in the country.
The model has proven popular with millennials, along with other individuals who can’t afford to buy, or just don’t care to. Most find not having to deal with real estate agents and private landlords appealing. If there’s a problem, the onsite concierge sorts it out fast.
For landlords, the returns have been more reliable than those in the commercial sector. During the GFC, for example, occupancy rates stayed at over 90 per cent and it’s likely to be a similar story with the COVID crisis.
As our shopping centre carparks sit empty and institutional investors look for safe alternatives to CBD and retail, will we see build to rent taking off Down Under?
At Forbury, we’re watching the space with interest.