Retail property, particularly the fashion sector is going through a structural change and whilst bricks and mortar is still important, more consumers are buying online.
What would happen to the restaurant industry if cloud kitchens begin to evolve? With the success of Uber eats delivery it makes total sense to create a lower priced kitchen not located on a busy street from which all deliveries are rendered. Is it possible for several restaurants to collaborate to create scale? Who knows….. but it is changing fast and as investors we need to be aware of the changing dynamic.
I was walking down Chapel Street South Yarra the other day and was surprised by the number of vacancies which are mounting there. This trend is widespread across other strips in Melbourne as some landlords fail to move with the times. Some of these premises will change to professional services and corporate office use . Entertainment is replacing traditional retail uses – for example co-working spaces, Gymnasiums and Childcare Centres are booming. Fitouts are impressive and staff are highly trained in industries that understand the change movement.
Cafes are becoming living rooms and study spaces which Landlords need to understand. Rent paid by tenants needs to be proportional to the sales of the lessee. It can be sustainable if rental are between 6-10% of sales. New generation landlords must change their mindset to understand this. Smaller retail spaces are on trend but with high quality fitouts that can be created fairly quickly.
Retail footprints are also moving to the suburbs. Think Church street Brighton and Chapel street Windsor which are two strips that come to mind that are doing well. Landlords that simply want higher rents are not doing so well!