Australia's 2019 retail construction: At a glance

Retail construction in Australia always moves in swings and roundabouts. But the better understanding you have of where we are in that oscillating process, the better-placed you will be to capitalise on growth (or lack thereof) in our local market.

For Melbourne, there is generally a consistent pipeline of work. But as recent reporting from the Australian Industry Group (Ai Group) and BCI Economics shows, certain contractions can have big implications for retail construction.

Retail construction highs and lows

Knight Frank reports that in 2018, Australia saw record highs for office and retail investment volume. While yield compression in CBD areas means capital growth is harder to come by (reducing the likelihood of ongoing investment), there are still plenty of opportunities for growth in our retail space. 

What are the prevailing trends in Australia's commercial construction?What are the prevailing trends in Australia's commercial construction?

This positivity was reflected in commercial construction rates. The Ai Group notes that in Q4 2018, commercial building was up 4.3 per cent on the year before, and accounted for nearly one-fifth of all construction work in the country. Contextually, this comes after a sustained period of growth in retail and commercial construction, so it can be expected that activity would even out somewhat. 

Looking at the pipeline ahead, things are less positive. The Ai Group's reporting suggests that new commercial orders for construction are down 16.8 per cent on an annual basis. So while commercial construction is still a major part of our national building industry, we are facing a slower period than we've seen in the last few years. 

Despite this, the sector remains positive. BCI Economics' survey of architects, builders, developers and subcontractors shows a prevailing sentiment that construction levels will improve in the next 12 months. 

Trends in Australian retail for 2019

Unlike high rise, education and health, retail construction in Australia is critically at the mercy of online trends. Changes in how consumers spend their money, as well as the increasing shift to an online marketplace, have a massive impact on foot traffic through bricks-and-mortar retail spaces.

For example, Roy Morgan research shows that 46.8 per cent of Australians are online shopping at least once every four weeks. This is largely focused on entertainment, fashion and food, but encompasses the full spectrum of retailing (including bulkier sectors like automotive and furniture). As more people shift to online retail, there will be an irrevocable shift in the way we think about physical retail spaces and construction. 

The internet has dramatically reshaped retail construction.The internet has dramatically reshaped retail construction.

The first victim of this is small-to-medium retail. Knight Frank reports that capital growth in neighbourhood retail has been much slower than department stores or large shopping centres in the last year, while specialty stores have outperformed market benchmarks consistently. 

Within these high-end or large-scale retail centres that remain popular, there are key micro-trends. Spaces that can offer multiple experiences (for example, retail sites with gyms and medical centres) are in high demand, Knight Frank's research argues, while the addition of augmented reality experiences remains a key drawcard. 

Retail development faces significant changes in the future.Retail development faces significant changes in the future.

For retail construction in Australia, this may mean a consolidation in terms of the type of retail construction we see. Fewer independent stores outside established business districts, and more centralisation of multiple services in one space.

This presents its own unique challenges - bringing together entertainment, leisure, fashion, restaurants, exercise and even medical facilities in one large-scale development is no easy feat. But if it's where the trends are heading, it is important that developers know who to work with. 

To find out more about incoming trends in Australian retail, contact the experts at Vast Electrical. 

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