Home' The Channel Magazine : August 2011 Contents National Newsagent August 2011
AUSTRALIA'S RETAIL RENTS THE HIGHEST
IN THE WORLD
In all categories of retailing, Australian retailers pay
significantly higher rents than offshore retailers in comparable
markets, according to research by Morgan Stanley.
The findings will add weight to calls by newsagents and
booksellers, among others, for greater market regulation of rents.
Newsagents and booksellers argued for more regulation in their
submissions to the Productivity Commission's inquiry into retailing.
The investment bank compared Australian retailers to
comparable ones in the US and UK with similar sales densities,
rather than make what it calls "futile" across-the board
The biggest gaps in rental costs are to be found in the
speciality retail sector, where Australian retailers pay rents
about three times higher (and sometimes more) than similar US
Westfield Speciality Retail pays the most for shop space, an
average of US$1,428 per square metre, followed by Premier
Investments (Peter Alexander, Just Jeans, Portmans etc), which
pays US$1,202 per square metre.
In comparison, US competitor Limited Brands (Victoria's
Secret, Pink, La Senza) pays only US$421 per square metre while
clothing retailer GAP pays US$424 per square metre.
A smaller but still substantial gap exists in department
stores rents for Australian giants Myer and David Jones,
which pay US$227 per square metre and US$206 per
square metre respectively.
Only the UK's Marks & Spencer (US$216 per square
metre) pays more than Myer.
REDGroup highlighted rental costs as a
major issue facing retailers
Upmarket US department store group Saks, which has
its flagship Fifth Avenue store on the most expensive retail
strip in the world (annual rents of US$23,888 per square
metre) pays $149 per square metre, while at the cheaper
end of the US market, JC Penny pays just US$47 per square
In the electronics category JB Hi-Fi pays US$512 per square
compared, with US-based retailer Best Buy, which pays US$288
per square metre on average.
In its submission to the Productivity Commission, the
Westfield Group defended the rents it charges retailers, saying
they are a product of market forces.
However, collapsed bookseller REDGroup highlighted rental
costs as a major issue facing retailers, and the Australian
Newsagents Federation claimed in its submission that
Australia's 1500 newsagents are at the mercy of their landlords
when it comes to negotiating rents and leasing terms.
This article first appeared on Property Observer, Australia's
top spot for property investment news.
American big box retail giant Costco launched its second
store in Sydney in July, with the company expecting it to be more
profitable than its first location, which opened in Melbourne two
Experts say nearby retailers at the new location will benefit
from higher foot traffic as long as they do enough to keep people
entering their stores.
The opening of the Sydney store comes as the company
prepares to open a new store next to Canberra airport.
Crossmark Chief Executive Kevin Moore says retailers near
the Auburn Costco store will be able to benefit from higher foot
traffic, hopefully giving their sales a shot in the arm.
Retail experts say that independent stores need to adapt if
they see larger retailers opening nearby, such as advertising
more services rather than products.
Those comments came after Woolworths confirmed a spot
next to Costco's future Canberra location in order to benefit from
the extra foot traffic the store is likely to receive.
BOOK SELLERS AMAZED
Booksellers were amazed to hear the federal Minister
for Small Business Nick Sherry predict that online
shopping would wipe out general bookstores within five
The Minister said he expected that only specialist
players in capital cities would survive. After online
competition helped trigger this year's collapse of
Australia's biggest bookselling chain, Angus & Robertson,
Senator Sherry said further growth in online sales was
"inevitable". This would leave business owners exposed if
they failed to adapt to the new environment, he said.
"I think in five years, other than a few specialist
booksellers in capital cities we will not see a bookstore,
they will cease to exist," Senator Sherry said.
The Booksellers' Association's President, Jon Page,
of Pages and Pages Booksellers at Mosman in Sydney,
said the minister had demonstrated "a distinct lack of
understanding about the Australian book industry".
COSTCO TO OPEN IN SYDNEY
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