By Helen Douglas from CorporateRealEstate.com
It is safe to presume that shopping is an activity most people have to factor into their weekly budget. From a spontaneous bout of retail therapy to the weekly grocery shop, unless you are a stringent budget shopper, these tasks are often a pricey exercise- gradually becoming more expensive as time rolls on. Ever since the GFC, people have not been able to devote as much money, or time, to retail as they once could.
Have you ever wondered why this is the case? Do you find yourself agonizing over how much your next grocery shop will cost? You’re not alone…
It’s not only your wallets that are feeling the brunt of it, but the shopping centers are feeling the effects of the economic climate too. In fact, for the last few years shopping center net incomes have faced severe challenges. And so, the slippery slope begun.
According to BIS Shrapnel’s latest Retail Property Market 2014 to 2024 report, this trend is likely to continue for the next 5 years.
The report explains that there are 5 crucial factors at work and each are likely to inhibit income growth. These factors comprise:
- Modest GDP growth
- Slowing population growth
- Household disposable income averaging 2.6% compared with a 25 year average of 3.3%
- Retail turnover growth averaging 2.9% per annum
The concoction of the above factors make it very difficult for the shopping centers’ income to rise, forcing them to increase rent which puts strain on tenants, turning shopping into a pricey exercise for the consumer.
You may be thinking, ‘I still shop, regardless of the price. Why would there be a problem?’ The problem lies in the fact that the market is steady but modest, when it should be, in an ideal world, thriving.
The report’s author, Senior Project Manager Maria Lee elaborates “Add the five factors together, and we predict that shopping center incomes will average around 2.6% annual growth over the next five years, failing to keep pace with inflation.”
Inflation aside, online shopping plays a big role in the decline of the shopping center income. BIS Shrapnel estimates that the growth of online shopping will knock about 0.5 percentage points per annum from the turnover growth flowing to shopping centers. Lee continues: “In addition, there are factors that affect the distribution of aggregate expenditure both between physical shops and online, and between one shopping center and another.”
As long as the market stays the same, the prices of your essential goods may stay that little bit ‘overpriced’. Be mindful of the effects of online shopping and, as the consumer, be mindful that this a cyclical process which will take time to improve. As BIS Shrapnel asserts, the market is steady but modest. At least it’s not unsteady because then we could be in real trouble.