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 purchases 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 centres are feeling the effects of the economic climate too. In fact, in the last few years shopping centre 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 centres’ income to rise, thus forcing them to increase rent, putting strain on tenants- thus turning shopping into a pricey exercise.
You may be thinking, ‘I still shop and all my friends do too, regardless of how expensive it is. 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 centre 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 centre 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 centres. Lee continues: “In addition, there are factors that affect the distribution of aggregate expenditure both between physical shops and online, and between one shopping centre and another.”
So when you’re next at the shops, take a moment to think about the state of the market and how it affecting more than one party. As long as the markets stays the same, the prices of your essential goods may stay that little bit “overpriced”. Be mindful of the effects of online shopping too, and as the consumer, be mindful that this a cyclical process and will take time to improve. As BIS Shrapnel has said, the market is steady but modest. At least it’s not unsteady because then we could be in real trouble.