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Development frenzy emerging between local builder alliance and national property retailers

Development of retail space at Townsville shopping centres

Development Local Alliance

A development frenzy has emerged between Townsville City’s local builders, State government subsidiaries and the “Big 3” major shopping centres who are upgrading brands, defending loyalty and seducing retail tenants with competitive prices against the central business district (CBD) around the North Queensland Cowboys Stadium.

Townsville’s CBD revitalisation initiative was identified as a Priority Development Area (PDA) by the State government in 2015. As the next iteration of Townsville’s rebranding and call to action initiative, the Waterfront Priority Development Area (WPDA) is delivering the $250 million North Queensland stadium project as it gets under way with earthworks this week.

Local builder and developer, Lancini Developments has invested in the vicinity of $50 million in the CBD Revitalisation. The cornerstone of the CBD development is the City Arcade retail area mixed use development including a Woolworths, City Lane restaurants, boutiques, and service stores connecting to Flinders Street Mall.

Embarrassed by the low appeal of the CBD after David Jones left the city in 1993 to set up at Stockland’s Aitkenvale Shopping Centre, the State government and local Council decided on the city’s Flinders Street upgrade in 2010 attempting to reintroduce traffic into the mall and drive further development of mixed use space.

Synonymous with the City’s development over the past 30 years and as determined as a legendary Cowboys halfback, the less conspicuous Lancini Developments’ Chairman, Lawrence Lancini has led the CBD revitalisation and city’s resurgence strategy.

The local builder has also constructed the Ergon Energy building on the corner of Flinders and Stanley Streets and the site of the new McDonalds restaurant located on Stanley Street.

In addition, the local businessman is redeveloping the old Woolworths site at the corner of Sturt and Stokes Streets. Lancini Development is close to completion of its $10 million mixed use shopping centre which will produce over 1 acre (4693sqm) of space.

The City Point centre will be the developer’s new Townsville office. Large retailers in electrical appliances, homewares, sporting goods and a variety retail stores will move into the double storey building. Zambraro’s has already announced they are relocating to the site from Flinders Street East.

Big 3 retailers pushing back

And now we are seeing the “big 3” commercial and retail players this week push back firstly Willows, and the Stockland and Castletown centres are set to follow.

Dexus Property Group, owners of the Willows Shopping Centre launched its $70 million expansion of retail space this week. The first big retail property owner leading the charge over the Lancini-backed CBD, Fairfield Waters and QIC Properties Domain Central retail property expansions.

And the impact is substantial as these big brands and many others are now occupying an extra 2 acres (8000 m²) of space at the shopping centre. The Willows Shopping Centre expansion to the north-west of the city has secured the tenancy of big retailers such as Harris Scarfe, Cotton On and other fashion stores, Surf Dive n Ski and Urban Wear.

Major Projects Feasibility Ranking: $22 Billion Investments in Townsville North Queensland

Government backed capital investors

But the local players are not intimidated because they have musted their own big capital hitters.

The Queensland Treasurer, the Hon Curtis Pitt announced that the Government-owned Queensland Investment Corporation (QIC) is investing another $6 million on top of the existing $140 million of its acquisition of the Domain Central Shopping Centre at Garbutt.

More developments on this site are to come after QIC’s subsidiary company QIC Properties Pty Ltd acquired the shopping centre and land from Lancini Property and Development in 2015.

The acquisition by the State government-owned entity sparked free market concerns in the retail property market, as the property development is in direct competition with the privately owned commercial shopping centres across the City. Of course, in a global investments marketplace, the State government has every right to invest its assets and capital through commercial capital funds under the current free trading environment.

As exciting as the 2015 Cowboys grand final win, Willows, Stockland and Castletown are hitting back and a serious showdown for field position and ultimate glory among the property developers and big retail players is alive and kicking in Townsville.

What about the consumers?

While consumers may get a slice of the pie in the form of great bargains and deals, the intense competition between the property developers is directed at the relationship between brands and bandwidth as the large international retailers like Aldi, Costo and Amazon enter the market in the capital cities.

Shoppers have already seen specials and promotions at many of the retailers of up to 70 percent on a consistent basis over the past few years. The promotions have been aimed squarely at retaining loyal shoppers in the big 3 centres. The impact has continued to be felt on CBD retailers struggling to attract foot traffic.

The cost of stock in a fast moving branding supply chain demands rigorous seasonal turnover of apparel to protect cash flows and minimise liabilities. Keeping the cash flowing is the life blood of business. During the Townsville market slump, retailers have been finding these key deliverables very tough indeed. There have been no exceptions in the CBD and in the suburban retail space.

The CBD and international broadband retailers have become a considerable threat to the big 3’s market share. And therefore they have no alternative except to fight back the best way they know how; drawing big brands, more space and aggressive promotions.

Consumers are set to win big time from the intense competition with additional choice and the aggressive promotions likely to create better bang for the buck from the discounts and ongoing sales.

Smaller retailers in CBD and convenience hubs

So the tough retail conditions are tempting retailers to shop around like their coal face customers have done. For retailers and brands, joining the State government and Lancini Developments CBD revitalisation has become a serious alternative.

The locally aligned and government policy sensitive suburban retail outlets at Fairfield Waters and Domain Central look on the face to be strategic in winning strong retail brands on the basis of diversity and convenience.

Retailers could leverage better value, and of course profits in a marketing mix driven by distribution around a revitalised cosmopolitan cultural and entertainment precinct created off the back of the NQ stadium development.

Commercial Property Report
Townsville Commercial Property Report – Click on the image to get your copy here!

Business is about getting more foot traffic through the CBD gates, and as the City’s 50,000 to 100,000 population growth is projected around the convenience hubs of Fairfield Waters and the CBD corridor to the south-west, the Lancini alliance has a strong distribution position for growth and cash flows.

The ever insightful Shari Tagliabue wrote in her Townsville Bulletin column a clear testimony for the smaller convenience shopping centres, tempered concern for the CBD revitalisation that might fail unless the old rail yards are developed as a night market modelled on the friendly rival in Cairns. Hint, hint…

Ms Tagliabue said, “Supermarket brands have ousted most of the necessities I consider indispensable, which means trips to smaller convenience stores that will carry real brand names.” Competitors under one roof are options but not the principal desire of sophisticated shoppers like “Shari”.

This “prices all over the shop” narrative fit perfectly with the local developer alliance vested in the CBD revitalisation and suburban convenience supermarkets strategy. One can only imagine the critical retailers who have been smashed on price and overheads in the big shopping centres are listening.

Could there be an announcement that Target, being remodelled at Castletown for Coles, might make a move to the CBD? Or what about a Kmart or Big W moving in the heart of the city?

The Domain Central QIC properties development at Mount Louisa will include an IGA convenience supermarket and six other retailers.

Fairfield Central shopping centre owners’ Landel Pty Ltd and Fairfield Land Pty Ltd, in alliance with Lancini Developments, have lodged a further development application to extend on its $24 million stage 3 development at Idalia on the Bruce Highway to the south-west of the City. The expansion will be anchored by Coles with space for speciality stores and the local builder will carry out the extension works.

The Fairfield investment will add another 2400 m², including 1650 m² for a major tenant, and more speciality stores along the western and southern side of the Coles supermarket.

Effectively the big 3 have matched the $50 million invested by Lancini Developments in the CBD. This in itself is enough antidotal evidence that the CBD revitalisation and State government subsidiaries strategic alliance is a credible threat.

As employment picks up in the next couple years in Townsville, discretionary spending by customers will increase too. The loyal tenants of the big 3 retail property giants have been doing their part retaining customers in tougher times.

Now they have been given a tough choice; stay with the mega space, high-value suburban shopping centre or go affordable, convenience and diversity in the CBD and growth corridors?

Well, the early birds are already moving. Brands including the Fashion Gallery, Foot Locker, Rockmans, Cotton On, Crossroads, City Beach and Barefoot have moved to make way for H&M at Stockland.

Townsville’s biggest retailer

Stockland Shopping Centre, partly owned by AMP Capital, is seeking to maintain its position as the leading retailer in the Townsville market, Stockland’s Commercial Property CEO John Schroder said.

Mr Schroder stated, “Securing H&M at these centres is a great example of how we’re investing in new shopping opportunities and experiences that lift the calibre and quality of our retail portfolio”.

The emerging 15-20% retail and commercial vacancy rate across the CBD precincts has lowered the price of retail space. Some reports identify prices as cheap as $110-130m2. Tenants are being offered to start up incentives of 3-month rent free deals.

Meanwhile, the big retail centres who control their own pricing and management, are fetching premium prices over $300-400m2 plus outgoings and mandatory refurbishment terms.

But to retain these prices, they must maintain their foot traffic and improve the buying power of customers. To these astute high-end shoppers, there is nothing more appealing than big brand retailers offering new product lines, brands and promotions.

Big retail brands like H&M, Harris Scarfe, and the destination and convenience stores such as Coles, IGA, etc. are what the Townsville market is seeing making moves across all of the shopping centres. It’s an intense branding and market positioning frenzy that is making Townsville a very exciting place to shop.

Protecting the turf splits Council

Meanwhile, McConaghy Properties, owner of Castletown Shoppingworld at Hyde Park also lodged a development application for the shopping centre’s $40 million reconfiguration.

The plans cover 5750m² of space including the retail giant Target, with an additional 3750m² for a supermarket and various small speciality stores, food outlets including basement carparks. The expansion plans may also include a new Coles.

As a direct rebuttal to another locally grown builder and developer, Parkside Developments who built the Parkside and Woolworth’s shopping centre at Kirwan, McConaghy mounted court action to stop a community-focused proposal to develop the largest Coles supermarket in Townsville at Currajong.

Before the distasteful court proceedings,  the giant food retailer Coles had been offset with Parkside Developments as the new cornerstone tenant in the local developer’s failed development on the site of the Townsville and District Rugby Union grounds.

The development application and approval split the Council in 2015. But the majority of the Councillors approved the initial Parkside Development application.

The appeal of the development to the community saw the majority of Councillors approve the initial Parkside Development application. However, the Planning and Environmental Court challenge later overturned the Council decision.

As a measure of the value of the retail property market, McConaghy’s action to protect its market share and viability of its Castletown asset keep Parkside Developments out of the next phase of Townsville’s big retail growth.

It was a bitter pill to swallow for the long time local property investor and developer. Commenting to Mr Tony Raggart from the Townsville Bulletin, Parkside Development director Mr Peter Tapiolus said “It’s unfortunate that opponents to the development put their vested commercial interests in front of a great outcome for rugby union in North Queensland and the 400 construction jobs and 250 full-time jobs that would have been provided with this development”.

Ironically, the pro-development Mayor Jenny Hill and Deputy Mayor Les Walker voted against the initial Council decision to approve the Coles supermarket development application.

Such events demonstrate the high stakes being played in Townsville’s property development marketplace since 2015 when the Mayor won the election and changed the landscape and personnel at the local government authority.

The outlook for local corporations willing to invest in the revitalisation of the city heart could now be infiltrating the baston of consumer spending that moved with the sprawl of the city. But the “big 3” are not taking it laying down. And the winners. Well, this is looking a lot more positive for the local residents who have been doing it very tough over the past few years.

Further reading:

Rangewood – Top Price Property Of The Week – 2 Raja Aho Road – $720,000

Kirwan – Top Price Property of the Week – 1 Crown Close – $655,000

Commercial property in Townsville found gasping for owner-occupiers

Hotel managers slam Townsville Council over Double Tree exclusive

Agricultural and water security boost for North Queensland; Hells Gayte Dam $2.2 million feasibility study 

Magnetic Island – Top Price Property Winner of the Week – 3-5 Endeavour Road – $520,000

Guide to selling a luxury home

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Aaron M, Editior
Aaron is the founder and editor of TREN eMagazine with 15 years experience in the real estate industry investing and helping investors seek value, leverage value and capitalise on value, developing professional and technical skills and capabilities that have enabled his success in business from startups, adoption, asset growth, management and community leadership projects. Aaron also loves travelling, sports, his partner Jodie and helping people discover their "why" and find their few "what's" in life that realise the "wows. The " www" in www.townsvillerealestatenews.com.au is one of his why, what and wow's that strive to add valuable content and analysis for readers to participate and win.
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