The Large-Format Retail industry. It’s big, it’s bold and it has some great characters.
Through venturing into property with the family business, to working on some of Australia’s biggest large-format retail developments like Harvey Norman Centre Cambridge, Marsden Park in NSW and the HomeBase Centres, Tony Draper has become one of the most well-known names in the industry to owners, developers, retailers and his peers. Tony talks about his experiences in large-format retail, his advice for new comers and why he sees more brands consolidating in the next five years.

How did you get started in large-format retail?

Through my father actually. Back in the 1980’s he began building HomeBase Centres. He was in the finance industry for many years and decided he would start developing property for himself, he thought it would be great if you could buy all home related items in one location. He went to the UK and investigated the LFR market and found that the concept had already started over there. So he found a UK lender who understood the market and they funded the developments and his ideas. I started getting involved in the property management and leasing through the family business following my interest in property. I started out as an assistant centre manager, then centre manager and leasing specialist. As the sector started to develop, I started to receive a lot of interest from other owners approach me to get advice on centre configurations, likely retailers, etc. This then developed further into a services company called McKenzie Hall which I started in 1997.

What advice would you give for people starting out in the industry?

Stay away – only joking! The industry is a very small closed shop to outsiders and the best advice is once you’re in, stay in as you will become more successful as the years roll by. I think the best start is to be involved in industrial leasing prior to getting into large format retail, this gets your head around transactions in large sheds and gets the basics grounded. From there I encourage them to do some traditional retail. If possible join one of the larger commercial real estate agencies such as Colliers as they will have the bulk of the large format retail opportunities nationally. All they need to get started is their real estate license and a good team to be part of.

Where do you see the large format retail market heading in the next five years?

Similar to the UK, over many years the sector went from lots of smaller retailers and many competing brands. Over time the store footprints became larger and the amount of competition became less and I predict more category killer stores. There are now many centres with only a handful of large scale boxes which previously could have been many more smaller tenants, larger stores and more consolidation of brands.

There is significant upside in dominating a category and having less competition, there are also quite a few private equity groups looking to capitalise on retail success in the same way. There will also be continued consolidation in centre ownership as the sector becomes more stable with larger ASX listed tenants, capital is more comfortable investing in the sector. The likes of Harvey Norman prefer to own than lease and are the largest owner of large format retail. Then other groups such as Aventus Property have heavily invested into the sector who are now listed on the ASX, creating more appetite to grow the fund. Low interest rates have seen investor returns shrink and large format retail still provides reasonably high returns compared to the rest of the market making it become a more stable and accepted sector.

Why do you see large format retail brands consolidating?

There is significant upside in dominating a category and having less competition, there are also quite a few private equity groups looking to capitalise on retail success in the same way. There will also be continued consolidation in centre ownership as the sector becomes more stable with larger ASX listed tenants, capital is more comfortable investing in the sector. The likes of Harvey Norman prefer to own than lease and are the largest owner of large format retail. Then other groups such as Aventus Property have heavily invested into the sector who are now listed on the ASX, creating more appetite to grow the fund. Low interest rates have seen investor returns shrink and large format retail still provides reasonably high returns compared to the rest of the market making it become a more stable and accepted sector.

What is the best way owners and developers can maximise their assets for large format retailers?

Owners and developers need to continually invest in quality brands which is something I cannot stress enough to all my clients. I encourage them to keep reviewing lease expiry profiles and replace where required to best-in-category for each usage. Centre refurbishment is also a key way they can enhance the appeal through better use of materials away from the traditional pebble-Crete tilt slabs and flat boring buildings. Things such as decorative panels, new lightweight materials, better retailer shopfront treatments, better amenities and catering for kids play areas and food offerings. Centre owners shouldn’t let things get stale and focus hard on tenancy mix. A strong tenancy mix should be a priority rather than just accept the highest rent payer, and revisiting every 7-10 years. Getting the mix right will drive more traffic and in return happier retailers. SCN