Financial Review
26th April 2017
Woolworths has just signed a 15-year lease deal at the Pellicano Group’s $600 million South/City/SQ development in Brisbane’s Woolloongabba, creating what will be its next major full-line store.
So why would Woolworths spend what sources estimate will be at least $20 million in rent on a new 3600 square metre store, when there is a Woolworths about 2.8 kilometres away?
The answer is Brisbane’s apartment boom and Pellicano’s strong sales.
Woolworths is anticipating about 4000 new apartments will pop up in a 2km radius of its new store at Pellicano’s South City, which itself will have about 1000 apartments on completion.
“Woolworths regularly investigates opportunities to bring a convenient community supermarket to a new location,” Woolworths regional property manager for Queensland Phillip Peel said.
We consider a variety of elements when deciding if we should progress with a development proposal including the area’s population growth and community support for a new supermarket.”
Leading retail analytics group Location IQ estimates that the current retail spend in the main trade area in Woolloongabba is estimated at over $358 million a year, and is projected to more than triple in size, increasing to $1.08 billion over the period to 2031.
Furthermore, property research firm Urbis has forecast the Woolloongabba catchment’s population to grow to more than 33,000 by 2036, a 50 per cent increase from 22,000 now.
“Given the substantial growth anticipated in this area, its proximity to Brisbane CBD, and its strong road network we believe this location will provide convenient access for our customers and we look forward to delivering high quality produce at great value for local residents,” Mr Peel said.
Strong market demand
Pellicano’s development operations manager Michael Kent has worked hard with joint venture partner Perri Projects to make the development capture as much of the population and demand for housing as possible.
“When creating the vision for South/City/SQ, Pellicano and Perri Projects recognised the strong market demand and sought to create a project that integrated premium retail and hospitality offerings with the quality residential offering,” he said.
Cinema company Reading Entertainment also signed up to the development on a 15-year lease within the group’s 13,000sq m retail component.
“South/City/SQ’s retail and dining precinct is located just a three-minute walk from The Gabba, which draws over 330,000 people to its sporting events each year. That’s 330,000 people that will want to dine, be entertained, and patronise retailers before and after events,” said Mr Kent.
But how reliable are the estimates of growth?
If the strength of sales for apartments and the orderly settlement process is anything to go by then Woolworths has probably made a smart decision.
The South/City/SQ attracted $190 million in sales covering 370 apartments in just the first few months on the market, indicating that despite some slowdown in the Brisbane apartment market well-located projects with good amenity are still attracting investors.
Woolworths’ Mr Peel said the company was “thrilled to secure” one of the key retail tenancies in the South/City/SQ development, as the growing population indicated clear demand for a full-line supermarket.
“Woolworths identified the opportunity at South/City/SQ and worked with Pellicano to secure our long-term presence as part of this new retail destination,” he said.
“We are delighted to be part of South/City/SQ’s regeneration of this former industrial site and are excited that local residents will soon have access to one of Australia’s most modern supermarkets.”