This article by Marco Ettorre, Executive General Manager, Retail – Dexus, forms part of SCN’s annual CEO Outlook feature published in Big Guns 2024. Premium members can view the full digital magazine here. 

In 2023, Dexus acquired AMP Capital’s domestic real estate and infrastructure business, adding Australian and New Zealand shopping centres to the Dexus retail portfolio, including iconic assets such as Macquarie Shopping Centre, Royal Randwick and Bayfair Shopping Centre in New Zealand.

Market observers saw the acquisition as two businesses coming together to increase scale, but for us, this transaction has strengthened our capability to enhance execution. Put simply, one plus one equals three, transaction.

Now, with a total portfolio of 29* strong retail assets, we are able to leverage the entire Dexus platform including investment, development, leasing and asset management expertise to deliver more for our customers, our retailers and our investors – what we call the Dexus difference.

Today, we stand as an integrated real estate asset manager with $A9.9 billion in retail assets under management with shopping centres located across Australia and New Zealand, and exclusive city retail in Sydney and Melbourne CBDs. Under Dexus management, the managed retail portfolio has grown sales by more than double the Australian growth rate in 2023, and even higher when taking into account the continued recovery of the CBD retail portfolio.

Knowing your customer

Traditionally, shopping centres housed mostly department and specialty stores offering predominantly fashion and non-discretionary retail. We have now seen the optimal re-engineering of shopping centres transform into integrated retail precincts offering customers a greater mix of entertainment, essential services, and food and beverage options, including bespoke fresh food markets, casual dining and restaurants. This enhanced retail mix extends the body clock of an asset while giving people more reasons to visit the centre, driving overall foot traffic improvements.

We have embraced this trend at Dexus, evolving our centres to ensure they meet the needs and desires of our customers and retailers in each trade area.

A significant retail precinct that was transformed by Dexus was 25 Martin Place, located in the heart of Sydney’s CBD. Prior to its transformation, this retail asset was simply a place for city workers to grab a quick bite to eat during their lunch break.

The reimagining of the precinct has delivered a modern, high-quality retail precinct luring in city workers and tourists with its vibrant retail, dining and entertainment offerings, including the reopening of the upgraded Theatre Royal Sydney.

Leveraging the expertise of the Dexus platform, we worked across multiple teams to inform the project design to support future activations, engage the office leasing team on customer preferences and collaborate with our retail leasing team to design a luxury fashion destination and dining precinct that contributes to the city’s day and nighttime economy.

As retail managers, we know shopping centres are not linear and that bespoke offerings are important. We have introduced the Automall car dealership and service centre at Indooroopilly Shopping Centre and, working with our healthcare property teams, we have incorporated healthcare services and facilities at our shopping centres, such as the Grace Private women’s health clinic at Brickworks on the Gold Coast.

Managing retail assets requires an on-the-ground approach, and these additions are a result of a deep understanding of how our assets are operating, gained from customer conversations, engaging with operators to provide unique offerings that are matched to specific trade areas backed up with research to support these strategic decisions. This year, we are excited to bring this expertise and experience to recently acquired assets, exploring opportunities to improve the experience for shoppers, retailers and the community alike.

In North Queensland, research undertaken with customers and the broader community network revealed a strong preference for the inclusion of an ALDI store to provide more choice when it comes to their grocery shopping. Working with our national leasing team, which has an existing relationship with ALDI, we were able to find a win-win solution, securing ALDI for Townsville’s Willows Shopping Centre.

Willows has the only ALDI store in Northern Queensland and since opening in November 2023, it has been a drawcard for the centre, helping to drive foot traffic up 14% over the prior corresponding period.

In Perth, we worked closely with TK Maxx to bring its first West Australian store to Ocean Keys and in New Zealand, we worked with Kmart to upgrade its offer at Manukau Supa Centa. In each case, these store openings received widespread local media coverage, delivering a halo effect for the centres while also driving positive commercial outcomes.

Getting the retail mix right is a critical element of a successful centre and one that we have invested in across our assets.

Macquarie Centre, NSW

New horizons

As part of the AMP Capital acquisition, Dexus has become a substantial investment manager of investments in Australia Pacific Airports Corporation (APAC), the unlisted holding company of Melbourne Airport and Launceston Airport.

Melbourne Airport is the second busiest airport in Australia, servicing 39 million passengers per year, offering a captive retail audience. Like many capital city airports, commercial revenues are derived from a range of ground transport, retail and other property activities.

As an investment manager of a significant shareholding in Melbourne Airport, we are proud to contribute our strong leasing and development expertise, national retailer relationships and customer data insights to support the management team and our fellow shareholders’ efforts to further enhance both the retail offering and passenger experience at the airport.

Retail at Australia’s major airports has continued to evolve over the past decade and we are excited to play our part in the next stage of this new retail horizon.

Building for the future

At Dexus, we have an active stay-in-business capital improvement program that will be carried across to our new retail assets. As asset managers, we invest in our centres to keep the travelators and air conditioning working, the carparks efficient and our food courts clean and comfortable.

Importantly, sustainability is top of mind when planning capital improvements, whether that means delivering more energy efficient facilities, creating more green community spaces or supporting local community group activities at our centres.

In 2023, we delivered more than 150 capital improvement projects with a further 120 projects expected to be completed by the end of FY24. These projects help us to continually improve our centres, evolving our spaces to the needs of the community.

2024 outlook

As we enter 2024 on the back of the most rapid and sustained increase in interest rates on record, the retail sector is bracing for a contraction in both discretionary and habitual spending.

Yet, this narrative has not yet been felt across our platform. In November last year, several of our assets had their best Black Friday period in the history of the promotion. Naturally, it was expected this record result would impact both traffic and sales at Christmas, but numbers from the portfolio are telling us this was not the case. Despite the talk, the retail environment remains resilient. At Macquarie Centre in Sydney, a significant uplift in sales and double-digit traffic growth was recorded over the Christmas period.

For our investors, we will be extending access to our assets by encouraging them to join briefings on location so they can experience the customer journey first-hand and get a behind the scenes look on how their asset is managed.

A combination of a resilient portfolio backed by a platform approach that puts customers at the centre, stands us in good stead, and we are optimistic for a successful year ahead.

* Total figure includes 13 shopping centres and 5 city retail assets managed by Dexus and a further 11 assets co-owned and managed by Scentre Group.