Bulky goods retail expansion to slow after record year

By Matthew Henry

SYDNEY: Last year saw the largest expansion of bulky goods retail floorspace on record but the sector which is dominated by large superstores such as The Good Guys is maturing and is unlikely to continue at its present rate of growth, according to BIS Shrapnel.

The Bulky Goods Property report released today by BIS Shrpanel estimates around 750,000 square metres of bulky goods floorspace was added during 2006, eclipsing the former record of 450,000 square metres added in 2004.

In eight years of producing the report BIS Shrapnel has never recorded such a significant increase, which is attributed to larger development projects and strong consumer demand for the supercentre retail experience.

“The 2006 figures are staggering,” said the BIS Shrapnel senior project leader and author of the report, Maria Lee.

“Over the last eight years in excess of 3.8 million square meters of bulky goods floorspace has been built as provision shifted from strip retailing to purpose-built centres and freestanding ‘category killer’ superstores.

“Some of the growth, of course, also catered to growing consumer demand for bulky goods items, which has outpaced overall retail spending growth.”

The total amount of bulky goods retail floorspace in Australia now stands at 4.6 million square metres.

Completions of bulky goods sites in Queensland outstripped that of New South Wales and Victoria during 2006, with close to 230,000 square metres added, the report said.

However, New South Wales still has the largest share of bulky goods floorspace in Australia – with 800,000 square metres in Sydney alone – and added two sites in excess of 30,000 square metres during 2006 – the Belrose Supa Centre and Auburn Power Centre.

While BIS Shrapnel said the bulky goods boom has not yet ended, 2007 is unlikely to match the pace of development witnessed last year with just over half the amount of new retail floor space likely to come online, or around 400,000 square metres.

The bulky goods sector is entering a maturation phase, said the report.

“We are already seeing signs many areas are adequately supplied with bulky goods floorspace and believe current demand is insufficient to justify continued extraordinary growth in floorspace,” said Lee.

With many construction projects completed last year, the number of sites in the development pipeline is now slightly lower than 12 months ago.

According to Lee, this is the first time since BIS Shrapnel began monitoring the sector that this situation has arisen.

“The ‘golden age’ of bulky goods retailing is past. Over the four years to June 2005, average annual growth in consumer spending on bulky goods items was over 10 per cent in real terms as the sector benefited from a one-off shift to mortgage-backed debt. This cheaper source of funds facilitated the purchase of ‘must have’ items such as plasma TVs,” she said.

“Spending eased to 7.5 per cent in the year to June 2006 and is expected to reduce further to under five per cent over the next three years. The cracks that have been appearing will widen and spread.”

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