The Large Format Retail sector employs 441,807 people nationally and represents more than 24.7% of all retail sales.[1]
While certain sectors of the retail industry were adversely impacted in 2020, large format retailing – think Officeworks, Bunnings and JB Hi-Fi – commenced the decade with a bang.
As Harvey Norman Chairman Gerry Harvey reported in his company’s 2020 Annual Report, the biggest consumer change from the pandemic both here and overseas “is the elevated importance of family, home, work and study from home, cooking and entertainment from home.”
Certainly, looking at the half yearly results for several large format brands in Australia, many have been able to capitalise on this consumer shift. It has been a very lucrative time indeed.
Burgess Rawson Melbourne Director Billy Holderhead said sales revenue has surged across the board.
“Most retailers in the LFR sector are classed as ‘discretionary’, but COVID-19 has completely tipped that on its head with record sales performance reported right across the LFR sector,” said Mr Holderhead.
For instance:
- Home improvement retailer Bunnings, also part of the Wesfarmers group, reported half yearly revenue growth of 24.4% to $9bn[2]
- Wesfarmers’ Officeworks announced a 23.7 % increase in total revenue to $1.52bn for the first half of the 2021 financial year[2]
- Homemaker brand Harvey Norman reported revenue growth of 27% to $2.3bn[3]
- Consumer goods retailer JB Hi-Fi announced half yearly sales growth of 23.7% to $4.9bn[4]
- Hardware retailer Mitre-10 saw half yearly sales increase by 20.6% to $1.3bn[5]
- Super Retail Group, owner of Supercheap Auto, enjoyed a 23.1% jump in first half revenue[6]
“The move to working from home and change in consumer spending, due to an increase in home improvement projects, gardening and maintenance, will underpin ongoing demand for these retailers,” said Billy Holderhead.
“This success has certainly translated to strong property investor interest,” he added. “The most desirable properties in the market are top-tier retail investments, such as Officeworks and Bunnings, as they traded so well during the pandemic.
“These are blue-chip investments and very few freestanding properties have been publicly marketed in the last 18 months, so we expect strong competition for anything that is put up on the open market.”
Burgess Rawson Sydney Director Dean Venturato agrees, saying that large format retail has several attributes that continue to generate demand in the $7.5 million plus range.
“Strategic locations, often with highway frontages, substantial parcels of land; ASX-listed tenants and secure leases all add up to a very desirable investment,” said Mr Venturato.
This appeal heightened during 2020 as large format retail continued to trade during lockdown.
“A huge benefit of large format retail outlets during COVID was the vast car parking areas,” Mr Holderhead said. “Retailers moved quickly to outdoor and socially distanced ‘click and collect’ services, with customers not even needing to leave their vehicles.”
Burgess Rawson is a market leader in sales and leasing of large format retail investments nationally.
Burgess Rawson’s recent LFR activity includes the $18.68 million sale of Bunnings in Lawnton, QLD, on a yield of 4.69%; the sale of Officeworks in Mona Vale, NSW for $14.75 million achieving a yield of 5.32%; AMX Clyde, NSW, $6.675 million investment sale on a yield of 2.91%; the record 3.13% yield for Bunnings in Glenorchy, TAS, and all lease negotiations for Bunnings’ $12 million 2020 expansion and upgrade at Kangaroo Flat in Bendigo, VIC.
Key Large Format Retail Players
Bunnings
- Part of the Wesfarmers Group
- Bunnings is the leading retailer of home improvement and outdoor living products in Australia and New Zealand
- 376 trading locations and employs more than 54,000
- Recently employed 6,000 new team members to service increased demand
- Two new stores opening in Victoria and planning approval granted for a store in Sydney[1]
Officeworks
- Australia’s leading retailer and supplier of office products and solutions for small and medium- size businesses, students and households
- Part of the Wesfarmers Group
- 167 stores nationally, 9,000 employees[2]
Harvey Norman
- An ASX-listed leading homemaker brand with 220 stores across eight countries (193 stores in Australia)
- Harvey Norman operates under a franchise system in Australia
- Estimated to employ 10,000 across the nation
JB Hi-Fi
- JB Hi-Fi is a publicly-listed Australian retailer that sells and specialises in consumer goods
- 303 stores nationally
- In September 2016, JB Hi-Fi announced the acquisition of The Good Guys for $870 million[4]
Mitre-10 [5]
- Mitre-10 is part of Metcash Limited’s Independent Hardware Group (IHG), the largest independent hardware group in Australia
- In 2020, Metcash announced the acquisition of a 70% interest in Total Tools, the largest independent tool network in Australia
Super Retail Group [6]
- $2.7 billion retailer, listed on the ASX, with 697 retail stores across Australia and New Zealand
- Brands include Supercheap Auto, Rebel Sport, BCF and Macpac
Check out the latest Burgess Rawson LFR property currently on the market - https://www.commercialready.com.au/properties/423-smollett-street-albury-nsw-2640-11319
[1] LFRA
[2] Wesfarmers
[3] AFR
[4] JB Hi-Fi
[5] Metcash
[6] Super Retail Group
Bunnings Warehouse, 20 Howard Road, Glenorchy TAS
