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Big gun malls in the billion-dollar sales club

Big gun shopping centres are now turning over an average $1 billion-plus in annual sales, putting paid to any concern than they are not relevant to consumers.

Landlords are spending just as much on new developments to make the malls the new town centre where food, movies and beauty salons generate more than the traditional apparel and department stores.

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Chadstone unveiling one month away

Massive, shiny new redevelopment will make Chadstone the largest shopping centre in Australia, with 600 retailers across more than 200,000 square metres – roughly equal to 10 MCG pitches.

This was reflected in the weaker sales for department chain, Myer, which reported that sales slumped by of 0.6 per cent to $1.78 billion in the 26 weeks to January 28, and second-quarter sales, which included the post-Christmas clearance sale, fell by 1.3 per cent in total, or 0.5 per cent on a comparable store basis.

In the 2017 Shopping Centre News Big Guns survey, Vicinity and the Gandel Group's, Chadstone is the largest centre with a gross lettable area of of 212,300 square metres and has the highest turnover with $1.5 billion in retail sales last year.

According to industry expert and SCN's publisher, Michael Lloyd, Australian shopping centres are the most "sophisticated in the world and the shopping centre industry leads the world in the development, management and marketing of its product".

"It's why every major shopping centre in Australia has an ownership structure that includes major pension funds, international funds and most of the major equity funds targeting prime performing real estate assets around the globe," Mr Lloyd said.

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"Since their inception in the 1950s, Australia's shopping centres, every year without exception, have beat inflation by at least 1 percentage point. That's something no other major property asset class, anywhere in the world has achieved."

Mr Lloyd, who worked with Lendlease founder Dick Dusseldorf and worked on creating Macarthur Square, said the strength of the industry can be seen in its retail sales versus those trading 'outside' the shopping centres.

Last week Macarthur Square opened its $240 million retail redevelopment. The Lendlease-managed centre includes a new format David Jones across two levels, international retailer H&M and a western expansion with a new look Coles, fresh food market hall, more than 40 new specialty stores, an alfresco and casual dining precinct, along with 500 additional car spaces.

Macarthur Square is jointly owned by the Lendlease-managed Australian Prime Property Fund Retail and the GPT Wholesale Shopping Centre Fund.

Gary Horwitz, head of retail at Lendlease, said the next generation Macarthur Square responds to the changing nature of shopping centres while acknowledging the centre's strong history and connection to the region.

"The redevelopment of Macarthur Square has allowed us to grow with the region and adapt to the changing demographics and needs of our local customers," Mr Horwitz said.

In the SCN survey, the star performer in the turnover table was Scentre Group's Westfield Miranda; in its first full year of trading after major redevelopment, the south Sydney centre improved its moving annual turnover (MAT) by 14 per cent recording total sales of $926 million.

Scentre Group's Westfield Fountain Gate in Melbourne's south east became the fourth centre in Australia to record an annual turnover of more than $1 billion.

Colliers International's director retail leasing NSW, George Wragge said it is apparent from the latest round of shopping centre developments across the country that "the biggest is best".

"The more out there you make these assets, the more chance you have of attracting a new customer base," Mr Wragge said.

The attraction of malls for investors remains strong, according to the latest JLL Australian Shopping Centre Investment Review which revealed that in 2016 transactions to offshore investors reached $2.3 billion, slightly below the $2.5 billion recorded in 2015.

Offshore investment activity accounted for a significant 32 per cent of total acquisitions, compared with the long-term average of 12 per cent.

JLL's head of retail investments, Australasia, Simon Rooney, said, investor demand remains very strong from domestic and offshore capital sources.

"Demand continues to outweigh supply of investment product, resulting in surplus capital which is yet to be deployed and driving competition-led yield compression," Mr Rooney said