In the current retail landscape, large format retailing is making a significant and positive impact, robustly establishing itself as a key player. This sector is thriving, demonstrating both adaptability and resilience in the face of various market challenges. Its strong performance and growth potential are increasingly capturing the attention of investors, highlighting its enduring appeal and significance in the ever-evolving retail world.

Since establishing itself in the 1970s, this sector has transcended its former status as the “poor cousin” of shopping formats, evolving into a strategic and thriving industry.

This is due in part to its adaptive nature and correlation with the ascendancy of online shopping.

Seeking opportunities to expand their footprints into previously inaccessible spaces, large format retailers have filled a void that other retail formats have failed to address. This flexibility in planning has also become a distinguishing feature of their success.

Prominent names like Bunnings, Salvos, Reece, The Good Guys and Cheap as Chips have become synonymous with large format retailing, showcasing its enduring appeal. Even office supply giants like Officeworks have found a lucrative niche within this sector.

Our data reveals these properties are rarely transacted with investors holding onto them due to their secure leases, ongoing strong returns and future upside.

In 2023, one of our largest transactions was the iconic Bunnings Collingwood which sold in excess of $63 million on a sub 5.0% yield, (Image above) confirming the robust demand for such assets. Data from the leading experts further substantiates the strength of this industry.

According to the Large Format Retail Association, by the end of the 2023 financial year, this sector comprised a massive 25.1% or an estimated $106.1 billion of all retail sales in Australia and covered a whopping 35% of all retail floor space.

A significant advantage for large format retailers lies in their lower cost per square metre compared to traditional shopping centres which propels the success of these businesses.

Rents are typically around $300 per square metre, however some big box retailing spaces will be stratospherically higher due to their premium and sought-after locations.

Not only do these assets offer investors secure income to highly regarded, established brands, they provide substantial upside due to their prized locations. Sites are generally large, flat and well-positioned, with ample arterial and motorway connections servicing significant population catchments.

Furthermore, large format retailers are underscored by their ability to not only survive the challenges posed by online shopping but to thrive by embracing innovation, collaboration, and sustainability providing a superior customer experience.

Efforts extend beyond energy efficiency to include shared initiatives like coordinating electricity purchasing, showcasing the commitment to cost-effective and sustainable practices.

A noteworthy trend within large format retailing is the collaborative effort by individual retailers to create synergies. While each operates independently, a growing sense of community permeates the sector.

With increased migration and population growth, strong demand for the products offered through large format retailing will further boost this sector.

The industry’s adaptability to changing market dynamics and its ability to foster a sense of community among retailers position it as a formidable presence in the evolving retail terrain. We believe these factors will stand as a testament to the resilience, evolution and success of the large format retail sector.

Scaling Up: The Rise of Large Format Retail – by Yosh Mendis Burgess Rawson – National Partner

Related LFR reading:

Bunnings Collingwood for sale by Burgess Rawson | Commo.

MaxCap and Troon sell Chirnside Lifestyle Centre to IOOF Investment Services Ltd c$50m - Colliers & Stonebridge  | Commo.

Queensland sale highlights investor demand for well established LFR assets - CBRE  | Commo.

HomeCo Box Hill sold to off shore private investors for $67,500,000 in major off-market transaction - JLL  | Commo.

Epping Hub sold to Forza Capital $70,250,000 by JLL  | Commo.

New appointment to grow Colliers Large Format Retail and Project Leasing business in Queensland | Commo.

Scaling Up: The Rise of Large Format Retail – by Yosh Mendis Burgess Rawson – National Partner