Shopping Centre News, No. 2, 2020 | CBD Guns | The COVID-19 issue by shoppingcentrenews

Y R T S I

Q&A feature: Retailers have their say

VOL 38, NUMBER 2, 2020

GUNS

2020

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THE COVID-19 an industry ISSUEreaction

SPECIAL FEATURES

VOLUME 38, NUMBER 2, 2020

SHOPPING CENTRE TEAMS RESPOND TO COVID-19 Highlights from across the industry

FOCUS 30 FOOD 70 Two of the leading F&B experts in the country give their views on the future

CONTENTS 2 4 7 15 28 30 36 38 42 44 49 50 52 54 56 60 64 66 68 70 74 78 80 84 87

RETAILERS HAVE THEIR SAY Retailers share their experiences during COVID-19 restrictions

DESIGN Architects at the cutting-edge examine retail post-COVID-19

From the publisher / Vale Jack Mundey The new normal: Retailers accelerate physical and digital integration Feature: Shopping centre teams respond to COVID-19 Feature: Retailers have their say: Q&A feature Comment: 10 key actions for retail recovery Food: The next-normal for landlords Food: F&B in the ‘new normal’ Legal: Coronalaw Comment: ICSC abandons its global role Feature: CBD GUNS 2020 Leading the retail revival in the pandemic era Communication in a crisis Advertising in the pandemic Shopping centres across Australia: our new local hero Research: Three questions landlords should be asking right now to achieve success... Research: Three scenarios for a Post-COVID-19 World Research: Post COVID-19 survival depends upon adaption Opinion: Another day, another article about the end of physical retail… Opinion: What retail can learn from the UK 'foot and mouth' epidemic of 2001 Design: Post-COVID-19 retail: The great retail reset? Design: Reframing retail in the wake of COVID-19 Design: How shifting perceptions and patterns shape our environments Design: The rise of the Retail Podium Trends: Universal design and inclusive retail Industry Shuffles

CBD GUNS 2020

In a challenging year, the results were far better than many analysts predicted. Vicinity’s Emporium in Melbourne tops the MAT table; its QueensPlaza in Brisbane is the runner up with a 7% increase! The Strand Arcade in Sydney’s CBD has the highest turnover per square metre of any centre, whatever size, in Australia and even in a difficult year, showed an improvement on last year of some 2%. SHOPPING CENTRE NEWS 1

from the publisher

he world is waiting for the ‘new normal’ since the outbreak of the COVID-19 pandemic. In itself, it’s an acceptance that things will never be the same; but just how different will they be? There is a huge gap between the subliminal acceptance of an undefined, somewhat vague, even ephemeral, ‘idea of change’, and the reality. And it’s global; in the UK for example, the economy is predicted to shrink by some 14%; they need to go back some 314 years to find a similar contraction. In 1706, Queen Anne was on the throne, England and Scotland were united, the first Duke of Marlborough defeated the French at Ramillies; that year, military expenditure, a disastrous harvest and unprecedented weather shrunk the economy by 15%. Since then, there’s never been a year as bad; until now! The ‘new normal’ will be represented by far more than just greater numbers working from home, perhaps less traffic at peak times and the increased use of video meetings.

The ‘new normal’ signals a new era and it will affect our industry dramatically. As it stands, we live in a consumer society; we want things and we buy them, mostly from shops. And why do we buy things (goods and ser vices)? Simple; because we can. But that ability to buy is quite new to us; go back just 100-years or so and it was all very different. In 1900, in the then, modern, western world, about 43% of income was spent on food; a further 31% on housing with clothing accounting for 14%. That totals 88% – and remember, the ‘food’ was basic; less than 15% of people

owned their own home so within just ‘food, clothing and shelter’, there were many ways to spend the ‘excess’ 12%. The reality is, there was no such thing as ‘discretionary income’. So, after people had bought what they needed, they didn’t buy things they wanted – because they couldn’t. The 'Age of Consumerism' arrived around the 1950s, not long after the end of the Second World War. The first shopping centres appeared in the 1950s, mostly in response to increasing consumer demand. We’re now well into 2020, some 70 years after the birth of the age of consumerism; it may well have flourished, unchallenged for another 30 years or so, but the coronavirus is notorious for attacking over 70 year olds, or certainly weakening them! The 'Age of Consumerism' is waning; this has real implications for our industr y. Those readers who are younger will need to pay heed; the road to success will lie in adapting our product (the shopping centre) to meet the new demands of our market. Our market will still have discretionar y income; our market will still spend, but what they spend it on will change. It won’t be a shattering, or sudden change; it’ll be subtle, but it won’t be lengthy; within 5-10 years, consumer spending, as it now is (or was before the virus) will be a feature of the past. All this 'change' has happened before; the difference this time is its speed. Coronavirus is the accelerator! Consumption of convenient, inexpensive, short-lived items will give way to those of quality, value and lasting attributes. A woman who (for example) purchases 10 pairs of shoes a year, will spend the same amount of money on say, 5 or 6, even 4 or perhaps even 3. So, probably the number of shoe stores will diminish but the quality will improve.

This will be the case across the board, in the jewellery category, fashion, homewares and a host of others. So, what will replace them? Undoubtedly, in part, by ‘services’ retail. More fitness venues, specialised – creative and aerobic dancing for example; more ‘specialist food shops’ – delicatessens, boutique butchers, specialist bakers and so on. What’s new? Nothing; tenancy mixes have always been in transition – this time though, significant change will be quicker. We should remember though, that this crisis affects and will affect all of us. Not just the shopping centre managers, leasing personnel and marketing executives, but also the portfolio managers and those representing the ownership vehicles. ‘Risk’ must be re-assessed; it is no longer feasible to see the solution for the future, as one in which the ‘old’ norms are re-established. For centres to achieve future growth, some chances need to be taken, some new leasing methods adopted, new strategic alliances between new retailers and marketing executives need forming. But; we are fortunate. This is a ‘world-wide’ problem for our industr y, yet the Australian shopping centre expertise is the most advanced in the world. There’s no one to follow; no one can ‘show us the way’. We’re ‘it’ and what we do, will be copied. Is there a hint anywhere? Might seem a bit ‘out there’, but Scentre Group doesn't call its portfolio 'Shopping Centres' anymore; they’re ‘Living Centres’. Not just a smart advertising quip, a fresh ‘banner statement’ or a clever ‘re-branding’. There’s social commentary behind it. One consequence of the coronavirus epidemic is universally accepted; lifestyles will change. What better place to exploit such change than a ‘Living Centre’! Michael Lloyd, SCN

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Jack Mundey 1929 – 2020

VALE

SCN’s publisher was fortunate to be a friend of the late Jack Mundey. In the true sense of the word, Jack Mundey was an extraordinary man. Had the coronavirus pandemic not been upon us, it is likely that he would have been granted a State Funeral, such was the magnitude of his contribution to his fellow citizens.

ack Mundey began his ‘public career’ as a union leader, head of the NSW Branch of the Builders Labourers Federation (BLF), at a time when corrupt politics in the state of NSW had reached its zenith. Developers ran wild and Sydney’s Rocks area was designated for demolition; Mundey, leading his union, lying in front of excavators, stopped the process and in so doing, saved The Rocks. Today, it seems incredible that so little value could be accorded to such magnificent architectural and environmental heritage. Part of Sydney’s Botanical Gardens was to be re-zoned to provide for a multi-storey car park for the Opera House; Jack Mundey led opposition movements against it with the result that the car park was placed underground. Centennial Park was earmarked for a giant sports stadium. Amongst many others, he saved major buildings in Woolloomooloo, Kings Cross and Glebe. His contribution to the preser vation of architectural heritage has, and will be, documented in volumes. His and his union’s major strategy in preventing redevelopment was to apply ‘Black Bans’ to certain building sites, forbidding any union member from working on them. In 1971, Jack Mundey was approached by a group of middle class ladies, residents of Hunters Hill, to help them in a bid to prevent the proposed development of Kelly’s Bush in Woolwich, one of the last parks in the suburb. Jack realised he needed a different approach; ‘Black Ban’ gave way to ‘Green Ban’. COPYRIGHT©

Jack Mundey being carried from a protest at The Rocks in the early seventies. CREDIT: ROBERT PEARCE

During the time, Spike Milligan was visiting Australia and used the term, ‘Green Ban’, to save the Birmingham Post Office. A group of German environmentalists, aware of the strategy, used it for the first time in continental Europe. It spread; the now international term ‘Green’, as used in relation to environmental conservation and sustainability issues, originated with Jack Mundey. His efforts and influence extended far beyond the architectural and environmental landscape. He saw the link between the built, and natural environment issues, with social movements – Women’s Rights, Gay Rights – and added his considerable weight to supporting the furtherance of their causes. In 1971, Mundey supported the protest movement against the South African Rugby tour; he was a fierce opponent of apartheid and campaigned solidly for the release of Nelson Mandela. He was arrested for interrupting the Sydney game, one of many times; he was placed in ‘lock-up’ cells on several occasions. He was ‘roughed up’ by agents of his opponents and was aware of a professional assassination plot spanning a six-month period, at the height of his Black and Green Ban activity. It’s estimated that Jack Mundey and his movement prevented some $5 billion of development; in today’s terms, that equates to a figure of around $80 billion. For this writer though, Jack Mundey’s lasting impression, will be that of a man who lived as he believed. He was never

tainted by fame or fortune; he (and his surviving wife Judy) practiced what they preached. He lived very modestly in a comfortable yet small townhouse in Croydon. He never owned a car, always using public transport throughout his life. He didn’t fly often, but when he did, he sat in economy. When I took over the Argyle Stores, converting the refurbished building into the Argyle Department Store in the late 1990s, I invited Jack Mundey to the Gala Opening. It was attended by some 500 or so of the highest profile celebrities, politicians, business leaders and the like; Jack Mundey was the only man in the room without a black tie; he said to me simply when I greeted him: “I don’t wear formal dress”. Jack Mundey was, simply, a giant of a man who contributed to this society with all he had. He was a rare idealist who championed causes in which he believed. He never ‘sold-out’, took an opportunistic ‘short cut’, or ever even entertained the thought, ‘what’s in it for me’. He was truthful, honest, socially committed and more to the point, effective. Although somewhat of a humble ‘rough diamond’, Jack Mundey was one of, if not the most intelligent, dignified and noble men I ever met. I was proud to have him as a friend. Jack Mundey’s legacy will live on. His influence extends world-wide; what he actually did is a piece of our history, something those who follow us will be proud of, as a part of their heritage. Michael Lloyd, SCN SHOPPING CENTRE NEWS 3

FEATURE COVID-19

As retailers gradually begin to re-open their stores, many are doing so with initiatives that converge the digital and physical channels in innovative ways. This article examines how Scentre Group has partnered with its retailers via the Westfield Direct Click & Collect initiative.

The new normal

retailers accelerate physical and digital integration

here’s no doubt COVID-19 has created unprecedented disruptions for physical retailing, with many consumers staying at home while those who do venture out being required to observe physical distancing practices, reducing the number of customers allowed in stores at any one time and changing the way people can move around shopping centres. Retailers have responded by boosting their pure online capabilities, but many of the new initiatives are accelerating a trend that was gaining momentum before COVID-19, the convergence of sales channels to create a hybrid physical and digital experience. 4 SCN

Harry Hartog Directors, David and Robert Berkelouw

Faced with unprecedented challenges, the retail industry has been quick to adapt its business models and many of these changes will continue into the future. For Harry Hartog Booksellers, this has meant boosting their online capability and introducing a free home deliver y ser vice for the first time, as well as adapting their book recommendation ser vice to be fully operational online. Book recommendations are created manually by expert booksellers across Australia. Customers can then opt to have their books delivered directly to their home. COPYRIGHT©

FEATURE COVID-19 Harry Hartog Directors, David and Robert Berkelouw, said: “We have dedicated our careers to creating bookshops full of imagination, emotion and empathy. At a time when society needs them most, we have been determined to keep supplying books, even from behind closed doors. We believe books have the power to create hope and to elevate us – even momentarily – from a world that has been overwhelmingly anxious and scared.”

In some cases, the current situation has brought forward innovations that retailers were planning for several years out, but which have been urgently fast-tracked as effective solutions for the unique lockdown period. One example of this is the new drive-thru contactless Click & Collect ser vice now available at all Westfield Living Centres, giving access to more than 540 retail brands with more signing on ever y week. Westfield Direct enables customers to access multiple Westfield retailers in one online transaction, and pick-up in one, contactless stop at their local centre. Orders come through to Westfield employees, known as ‘runners’, who take the items from each retail outlet to the drive-thru, updating customers by email at each stage of the process. The platform gives consumers access to more than 15,000 products across a variety of categories, from fresh food to lifestyle and everyday essentials. Participating retailers include leading brands such as Harris Farm Markets, Bakers Delight, Betty’s Burgers, Haigh's Chocolates and Boost in the food and beverage sector, along with lifestyle brands such as Aesop, Kidstuff, Harry Hartog, Kiehl's, Papaya and many others. In New Zealand, retailers to recently join 6 SCN

the platform include Inca by Nic Watt, Presshouse Café, Boba Bear, Hulucat Tea & Mocktail, Tai Ping, Tank, The Coffee Club and The Botanist Florist, with more to come. Fiona Krawczyk, Marketing Manager for Haigh’s Chocolates, says the initiative has opened up a crucial channel that has enabled the company to continue to serve its customers and maintain local production. “This new ser vice helps customers support local and small businesses and, in our case, also the purchasing of Australian-made products, during a challenging time, and that can only be a good thing,” Krawczyk said. At Bakers Delight, Joint Chief Executive Elise Gillespie says bakery teams are working hard to ensure that customers who are staying at home still have access to the company’s popular products. “Almost every one of our Westfield-based bakeries has jumped on board with this initiative,” Gillespie said. “Feeding and supporting local communities has been a part of our DNA for decades and it's during times like these that Aussie families need us more than ever.” Scentre Group’s Director of Customer Experience, Phil McAveety, said the challenging conditions posed by the pandemic demanded an agile response to the fast-changing needs of customers and the company would continue to adapt. Scentre Group was able to fast-track the Westfield Direct concept, and move from sketches on a whiteboard to going live within a matter of weeks. While the team was initially focused on existing fashion retailers who offered Click & Collect, as more retailers shut

their doors, it became clear that the needs were much wider. The Scentre team then pivoted to include food service partners, with a view to making it easier for their customers to order and collect. The capabilities of the eCommerce function were also upgraded through leveraging the technologies used in the new Westfield Plus app, which was recently launched in New Zealand, and the new Westfield Digital Gift Card in Australia.

“For our retail partners, Westfield Direct provides a new way for them to continue reaching their customers,” said McAveety. “The response from our retailers so far has been overwhelmingly positive, with dozens joining each day and we’re looking forward to seeing where the Westfield Direct service takes us in the coming months.” In the meantime, many retailers are beginning to reopen their doors and are focused on ensuring they do so with the health and wellbeing of their customers and employees front of mind, in line with the COVID-19 Retail Recovery Protocol, launched jointly by the industry on 1 May 2020. For some retailers, especially in the luxury category, it’s a matter of offering viewings to private groups of customers by appointment only. Many luxury brands that voluntarily decided to close their doors during March, have all now reopened at Westfield Sydney and Westfield Bondi. Homewares brand, Adairs has announced it will begin to reopen stores in May, with Chief Executive Mark Ronan saying: “Our staged store openings reflect our ‘safety first’ approach as we welcome back our team and customers into our stores. There is still a long way to go, however the actions and contributions made to date put us in a strong position to navigate this changing environment.” National children’s retail group Kidstuff has reopened selected stores, some with reduced trading hours, and has also put in place social distancing measures. SCN

SCN's inbox has been flooded these past months with extraordinary examples of acts of kindness and innovation by shopping centre teams across the country – we have been impressed by the adaptability, creativeness and the pace at which many of these initiatives were implemented to support retailers and communities – these pages showcase just some of the initiatives in response to COVID-19...

Industry review

Shopping centre teams respond to COVID-19 Melbourne Central's MCTV

 On April 15, Melbourne Central launched MCTV – where art, lifestyle and culture collide in a virtually led entertainment program. In a bid to bring the community together in new ways, MCTV boasts an ever-evolving program of gigs, supporting Melbourne Central’s local network of talented artists and connecting their dynamic customer to musicians, retailers and creatives they know and love, or are yet to discover. Melissa Polglase, Melbourne Centrals’ Development Marketing Manager, said: “Our community is at the centre of what we do at Melbourne Central. MCTV fosters a sense of connectivity at a time when our community needs it most. Savouring small moments, strengthening connections and finding the good in others is what will keep us together. The Melbourne Central precinct has always had a strong affinity to our city’s culture. Now more than ever, we are passionate about continuing to support our retailers, local artists, creatives and performers feeling the pinch.”

Mirvac Retail's 'Essentials Express'  Mirvac Retail unveiled an innovative new shopping experience across its centres in New South Wales, Queensland and Victoria. ‘Essentials Express’ is an online marketplace and contactless drive-thru pick-up service that enables customers to ‘click and collect’ a wide range of popular everyday items. Kelly Miller, General Manager, Retail at Mirvac said, “Key to this has been a willingness of our retail partners involved to be agile and rapid in the rollout of the Essentials Express. Our retailers have been very enthusiastic, and we are thrilled to deliver a curated and collaborative, online solution so they can continue to serve their customers.” Concept to delivery was accelerated to just one week through the agile collaboration of teams from across the business, in order to give shoppers a customised, safe and curated local shopping experience at a time of enforced social distancing.

Dexus on the 'road to recovery'  As the COVID-19 restrictions start to lift across the country, Dexus is working closely with retailers on the road to recovery. Detailed plans are in place to support the reactivation of each shopping centre. From social distancing controls and cleaning procedures through to the marketing and communications. Ben Hughes, National Marketing & Business Manager, Retail & Industrial, at Dexus said: “Dexus together with our valued retailers understands that the recovery is a united effort that requires commitment and hard work, in order to return to a more stable operating environment. The safety and wellbeing of the stakeholders that visit and work in our centres remains our highest priority as we continue to serve our local communities in the best possible way.” COPYRIGHT©

SHOPPING CENTRE NEWS 7

Industry review Responding to COVID-19 Lendlease’s Darling Quarter online yoga  Darling Quarter is hosting online kids' yoga sessions to provide some much needed entertainment during self-isolation. The popular program normally runs at Darling Quarter and has attracted hundreds of toddlers and parents to the program. The 30-minute sessions are held on Monday mornings at 10am and are led by the charismatic DeeDee – a qualified yoga instructor who specialises in children’s yoga. The classes are tailored for pre-schoolers, aged two to five years, but is also suitable for primary school-aged children. The yoga classes help toddlers and kids connect with their bodies, breath and minds, promoting positive body awareness, focus, compassion and individuality.

Haben centres celebrate Easter in a new way  While government restrictions on public gatherings may have hampered plans for in-centre Easter bunny visits and egg hunts, Haben shopping centres found a new way to celebrate the magic of Easter with a series of five centre-branded videos that were released on Facebook and YouTube to entertain, educate and connect with families throughout Easter. The videos featured sing-a-longs, games and active play, craft and story time. “We wanted to offer a new and unique way for customers to celebrate the magic of Easter with us,” said Marketing Manager Karla Bucoy. “The videos helped our shopping centres stay connected to their communities throughout Easter and hopefully provided some entertainment and education along the way.”

Wynnum Plaza delivers essential supplies and support to those in need  Wynnum Plaza is delivering care packages to community members who are struggling to buy the essentials during COVID-19, including the elderly, disadvantaged families and people with disabilities. Wynnum Retail Management General Manager Michael Belfield said the care packs are a way for the centre to give back and support the community during this challenging time. Free coffees are also being delivered to local essential workers within education, aged care, emergency services and healthcare during the month of May. Coffees have already been delivered to the hard-working teachers at Wynnum State School. Wynnum Plaza’s care pack and free coffee initiatives have been made possible by the support of the centre's retailers and partners including Donut King, Taste the Aroma, Michel's Patisserie, Dollar Stretcher, Nextra Wynnum Plaza, St Peter’s Anglican Church and the Bayside Patrol Group.

St Ives Shopping Village ‘Love Local’ campaign  St Ives Shopping Village is offering some much needed local community support to assist the elderly, young children and families who have been hit particularly hard as well as front line workers who have been working around the clock to protect the local community. The centre launched its ‘Love Local’ campaign on the 27 April, gifting three hampers weekly, to those in need. Until the 30th June, customers and retailers can nominate someone they know experiencing difficulties, or who they feel deserve cheering up, for a chance to receive a hamper that is delivered directly to their door. Additionally, Harris Farm at St Ives Shopping Village will be packing and distributing 80 to 100 boxes of fresh fruit and vegetables each day to local charities. 8 SCN

151 Property – k eeping retail centres buoyant during the COVID-19 crisis Faced with the unprecedented COVID-19 crisis and the prospect of significant downturn in foot traffic, 151 Property called on its centre marketing teams across its retail portfolio to rethink the way they attract and retain consumers. The teams pivoted quickly from planned in-centre marketin campaigns and events, to digital and in-centre initiatives. Innovative Top Ryde City initiatives are best exemplified by activities at Top Ryde City, Greensborough Plaza and Warrawong Plaza:  In partnership with retailers, local businesses and local artists, Top Ryde City produced Live Yoga for the Family, Live Eats & Beats and an Activity Blog Series. These initiatives led to strong channel results including 180,000 reach and significant growth in Instagram and Facebook engagement and followers.  At Greensborough Plaza in Melbourne, the centre held weekly trivia events online Jax Tyres, Warrawong Plaza every Saturday night, incorporating themes such as Easter traditions and questions about the community within Greensborough – which appealed to local history buffs. The initiative helped local families remain connected to each other and also to the Greensborough Plaza centre, generating more than 1,200 registrations.  Warrawong Plaza fast-tracked its Meet the Retailer campaign to put a spotlight on local retailers most impacted by government restrictions around COVID-19. The campaign assisted to address the foot traffic decline, with featured retailers such as Jax Tyres and food operators reporting customers possessed increased awareness of their trading hours and location within the centre, and consumers genuinely wanting to support their business. Retailer Academy

Frasers Property Australia – innovative COVID-19 responses

DOGUE workshop

Rooftop urban farm

 Retailer Academy: Fraser's Retailer Academy helps retailers navigate the pandemic challenges, tap into the available support, prepare for launch or re-launch, and ensure they’re ready to deliver a memorable customer experience – whenever that may be. Initially developed as an interactive program for incoming tenants, the Academy was adapted as an online resource for retailers. Each centre has its own Academy hub, an information exchange for retailers and staff, with everything they need to know about centre operations and their lease through to industry and government updates.  Weekly workshops at Burwood Brickworks: A range of online workshops held each week is helping the centre keep community connections alive. This month, dog owners joined online workshops coordinated through DOGUE, while Brickworks’ childcare operator Insight Early Learning treated young kids to some online story time sessions. The workshops have proven very popular and will continue in coming months, with plenty involving the kids as well.  Produce for people in need: The pandemic is not stopping the rooftop urban farm at Burwood Brickworks from producing top quality fruit and vegetables. Under a new partnership struck between Frasers Property Australia, Acre Farm & Eater y and a not-for-profit community organisation, that produce is now delivered each week to local people in need. The partnership, which kicked off in May, sees regular deliveries of the farm’s produce to ensure it finds its way into the homes and recipes of the people who will benefit from it the most. SHOPPING CENTRE NEWS 9

Industry review Responding to COVID-19 Stockland continues creating thriving communities Stockland’s commitment to its customers remains as strong as ever, as it strives to find new ways to make valuable contributions to its communities. Stockland town centres have taken this vision to heart, teaming up with its retailers to make a real difference in the lives of its customers and community during these challenging times of COVID-19.  One such example is at Stockland Birtinya, where the centre joined forces with Bakers Delight to make a delicious delivery of hot cross buns to the residents of Stockland’s Shine Birtinya Retirement Village – just in time for Easter.  Stockland Townsville also teamed up with Just Cuts at its centre to deliver nearly 90 complimentary hair care packages to some of their favourite regulars at a local retirement village, in an effort to make them feel special and cared for. Peggy Millios, owner of Just Cuts at Stockland Townsville, said that they were inspired to help some of those most vulnerable in the community, who may not be able or feel comfortable to leave their home. “Some of our favourite regulars aren’t able to come to us at the moment and so we wanted to take the Just Cuts experience to them. We also hoped that this would make them feel special and cared for at this time,” said Millios.

The District Docklands launches TDD Call & Collect  TDD Call & Collect is an initiative that delivers fresh food, groceries, medicine, meals and other essentials from The District Docklands and Market Lane straight to customers’ vehicles, seven days a week. Payment can be made via phone or tap-and-go upon collection. The precinct also offers 90-minute free parking for all customers. Social distancing signage and floor decals are installed, with hand sanitiser available at entrances and amenities. Restaurants continue to offer take away meals and delivery options, with some retailers launching initiatives, like Urban Alley Brewery now producing hand sanitiser as well as their craft beer home delivery serice. “We are pivoting our business to ensure that the community stays safe and has access to everything they need throughout the COVID-19 pandemic, particularly residents in the CBD, Docklands and Melbourne’s inner west,” said CEO George Karabatsos. “The District Docklands remains open to support our customers.”

Perron Centres launch ‘Carpark Collect’ service  Perron-owned and JLL-managed Perth centres Belmont Forum, Cockburn Gateway and The Square Mirrabooka together with their retailers have launched a new ‘Carpark Collect’ service. Customer Strategy & Engagement Manager, Ellie Quinti said, “COVID-19 has changed the way we go about our everyday tasks including shopping; however, our customers still require essential items, meals or favourite treats, these are now all available through the Carpark Collect service. This new contactless shopping service allows us to focus on the health and wellbeing of our customers, community and retailers. Furthermore, it enables our retailers, food court operators and restaurants to continue to trade, employ staff and contribute to our community during what is a tough time for retail businesses.” 10 SCN

Rosemeadow Marketplace’s ‘At home with Rosey’ video series  To bring customers a little inspiration and to help them stay connected, Rosemeadow Marketplace has launched 'At home with Rosey' an online video series. The videos feature retailers, making it authentic and true to who customers interact with on a day-to-day basis. The series includes DIY tutorials, health and wellbeing tips, with some retailers filming comedy skits to give customers a little bit of comic relief! How to remove SNS nail polish, cooking classes on how to make California rolls and at-home beauty tips were some of the videos produced. Local community groups also had the opportunity to participate. The local footy club shared backyard footy drills and exercises encouraging the community to stay active.

CBRE's – Click & Collect solution  CBRE Retail Marketing launched a Click & Collect solution to specifically support small-medium sized operators during COVID-19 at its managed centres. Working on the pilot with Hope Island Marketplace and Ormeau Village in QLD, the centres added a simple website page to include click and collect ordering to adjust to customer demands. The channel allows customers to order online from its retailers with the latter then able to keep 100% of the transactional value without any percentage kept by a third party – a huge benefit to struggling retailers during this time. Launched prior to Easter just nine days after inception, the initiative now has a pipeline of 10 more centres in QLD, WA and VIC, which will also include fresh food operators such as butchers, greengrocers and even service operators with medical centres and dentists being included. COPYRIGHT©

Banna says ‘Thank you’ to teachers  Banna Property Group thanks the unsung heroes on the coronavirus frontline. During these challenging times, teachers quickly emerged as some of the unsung heroes within our community. Teachers are helping students continue learning and stay engaged through online learning portals, while also keeping classrooms open for the children of essential workers. To recognise the continuous efforts of local teachers, the group teamed up with some of the centre food retailers and provided lunch and coffee to more than 300 local teachers across Banna’s portfolio of four neighbourhood centres. A small but meaningful gesture that allowed the centre and retailers to show support to our most crucial educators in our community.

Brandon Park – School Holiday program  Brandon Park Shopping Centre launched ‘Brandon Park Kids Online’ during the Term Two Victorian School Holidays. As a direct response to COVID-19, the initiative focused on providing the much-loved school holiday entertainment that customers often visit the centre for. Traditionally including entertaining and interactive daily shows for children to enjoy, Marketing Manager Megan Griffin decided to still provide the entertainment – just from the comfort and safety of their own homes. “We’re a community centre and we wanted to ensure our customers knew we were still here for them during this challenging time. We also wanted to give some parents a reprieve by providing them with videos the kids can watch on our website and join in with – whether it be kids' yoga, craft activities or a funny show. We ensured we had a different show each day to give the kids something to look forward to,” said Griffin. SHOPPING CENTRE NEWS 11

Industry review Responding to COVID-19 Colliers International – special meal offers  Waurn Ponds Shopping Centre: “Daily Dose of Sunshine” campaign focuses on lifting the spirits of Waurn Ponds customers with daily giveaways linked directly to the centre’s retailers in a bid to support them during this time.  Bluewater Square: The centre management team set up a table at each entr y point to provide customers with brochures, menus and special offers for takeaway options at the centre, enabling customers to easily access the takeaway menus for all of the food retailers within the centre. Each food retailer provided a special $10 meal offer that was well received by customers.  Kellyville Village: The ‘Shop Ahead' initiative is designed to make shopping at the centre easy and safe for customers and support retailers. "Let us do the shopping for you without having to leave your vehicle! Simply call ahead, make your purchase over the phone and our stores will prepare your order for pick up." Upon arrival to the centre, customers can park in the designated Shop Ahead car park bays and their order will be delivered straight to their car.

Bluewater Square

Retail First – food delivery initiatives  Retail First’s portfolio of 20 shopping centres in South East Queensland has seen impressive retailer initiatives, with retailers focusing on customers’ needs and looking to fulfil them in unique ways. Being creative and the ability to adapt in order to support the local community has been integral. Neighbouring fresh food retailers at Mt Gravatt Plaza, A&M Meats, Crispy Carrot and VJ’s Seafood have taken a collaborative approach and are offering a combined home delivery service, with a minimum spend of $50 at the butcher.  While seating areas are closed, food retailers remain open for business. Retail First has been working with its

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food catering category to assist them in adapting to a takeaway only operation, ensuring business continuity and greater ease of recovery. More than 70 restaurants and cafés at the Sunnybank Plaza and Sunny Park shopping centres teamed up with EASI, an Asian food delivery app, to provide discounts for all delivered food ordered from those centres. Customers simply log on to EASI and are immediately offered a discount if they choose to order from restaurateurs at Sunnybank Plaza and Sunny Park. The collaboration is well targeted to the demographic, enabling restaurants to continue to trade and service the community, as well as incentivising customers to order from the centres’ food retailers.

AMP Capital – supporting retailers and communities

Pacific Fair

 Pacific Fair partnered with local radio station Hit90.9 to donate 25 essential care hampers to people in need during the COVID19 pandemic. This included packages for new families, young families, singles and for nursing homes. People entered online to either nominate themselves or someone else that they know who needs assistance and Hit90.9 then delivered them straight to their door.  The team at Royal Randwick encouraged customers to shop local, supporting the people behind the brand of their favourite retail stores, through a retailer spotlight series entitled ‘Love Your Local’. A spotlight of each retailer was created including unique and entertaining facts about them, their products and their store along with a photoshoot to make this content come alive. Customers have been highly engaged with the content that was shared across the centre’s owned channels.  As part of Karrinyup’s retailer engagement strategy, trading retailers received a complimentary hand sanitiser as well as an Easter egg gift at Easter time. Following the introduction of restrictions for dine-in food, free coffee vouchers were provided to retail staff over a two-week period to support the food retailers and reward existing retail staff.

Royal Randwick Karrinyup

Macquarie Centre Indooroopilly

 Macquarie Centre has partnered with Brain & Poulter to develop a Triage Package for food catering and specialty tenants. The package aims to assist retailers during these difficult times by providing them with mentoring sessions on the best ways to reduce operating costs and stay in touch and connected with customers. Retailers will also have the opportunity to work alongside a Brain & Poulter food expert to develop an in-depth COVID-19 Survival Plan with costs covered by Macquarie Centre management. The Triage package is accessible to tenants via a 45-minute one-on-one Zoom call.  Indooroopilly Shopping Centre's annual community Easter Egg Hunt wasn’t able to go ahead when COVID-19 restrictions were implemented, despite 14 local kindergartens and schools carefully decorating their own giant egg for display in the centre. To keep community spirits high, the giant Easter Eggs were photographed and posted to the centre’s Facebook page instead, where the community voted for their favourite design. The top five most popular eggs shared in $5,000 worth of gift cards for schools to use for important education supplies. SHOPPING CENTRE NEWS 13

Industry review Responding to COVID-19 QICGRE – Acts of kindness  Feeding the frontline: QICGRE and its retail partners have together donated thousands of pantry hampers and snack packs to hospitals within their communities to thank medical staff and help them to make the most of their limited breaks. In early April, the team at Eastland collaborated with Coles Eastland supplying more than 7,000 food packages to frontline workers at both The Alfred Hospital and Box Hill Hospital. Eastland also collaborated with its cleaning contractor Glad Group and the Maroondah City Council’s Age and Disabilities Services division to ensure 2,000 toilet rolls were made available to disadvantaged members of the local community.  Spreading gratitude and good energy: The Village at Upper Mount Gravatt and Bathurst City Centre are among the QICGRE neighbourhood centres helping to spread gratitude for essential workers. Templated thank-you notes provided via centre websites and social media pages have been heartily embraced by shoppers and their contributed messages of thanks for health professionals, retail staff, delivery drivers, cleaners and other essential workers, then widely shared. The digital campaign highlights the role that shopping centres play in community wellbeing and is complemented by website content offering self-care advice and virtual activities for children.  Supporting young Aussies and their carers: Pacific Werribee delivered snack hampers to staff at local childcare facilities in recognition of their continued support of parents who must keep working through the lockdown. Amy Busuttil of Nido Early School said: “We thank the Pacific Werribee team so much for thinking of us (at a time when) our educators are not just caring for children but also performing extra cleaning duties to make our centre as safe as possible.”  Remembering neighbours and colleagues in crisis: The team from Watergardens in Melbourne delivered more than 150 care packages to residents of the neighbouring Lakes Estate Retirement Village. The team also distributed support packages of protective wear and cleaning materials to the centre’s tireless food service operators, many of whom have transitioned to a home-delivery model for the first time.  Giving to the givers and the elderly: The team at Grand Central called on their colleagues at Toowoomba Fresh and Theo’s Bakery to coordinate the delivery of fresh food hampers to the hardworking volunteers at Lifeline Darling Downs, a 24-hour telephone service providing free counselling and crisis support services. The hampers served as a gesture of appreciation for the telephone operators whose workloads have increased dramatically due to the COVID-19 pandemic. The centre also supplied nutritious fruit and vegetable hampers to the nearby caravan park for use by its residents left vulnerable by lockdown measures.  Bringing the magic of song and dance to little ones: At Robina Town Centre, local children are being treated to live-streamed ‘Story Rhyme Time’ sessions with kids’ entertainer Ani from The Kreative Fairies – a familiar face thanks to her regular appearances at the centre before the coronavirus. Accessed through a dedicated Robina Facebook group, the session is a fun-filled singalong that provides a dose of fun and frivolity for young ones battling the challenges of social distancing and time spent away from school and friends. The centre management team also delivered 1,000 activity packs to local childcare centres.  Helping women and children in need: Castle Towers in outer northwest Sydney has joined forces with Casey’s Toys and Best & Less to donate a range of games and winter clothing to longtime community partner The Sanctuary, which provides crisis accommodation for women and their children escaping domestic violence or facing homelessness. The Castle Towers team also partnered with retailers including Shepherd’s Artisan Bakehouse to supply food hampers to The Hills Private Hospital, Anglicare Health Centre and local Meals on Wheels provider Hills Community Care. SCN 14 SCN

Eastland – feeding the frontline

Spreading gratitude

Pacific Werribee hampers Watergardens care packages

Retailers have their say...

RETAIL Q&A

Most major retailers subscribe to SCN. Our opinion, like that in most progressive retail property companies is that, fundamentally, the success of a centre, lies in the co-operation between landlord and tenant or, more to the point, between the property manager and the retailer. We asked a few of our retail subscribers about their experiences during the COVID-19 situation; how their businesses have been impacted; what they think about government initiatives and their outlook for the future...

ALCEON GROUP RICHARD FACIONI

BRAND COLLECTIVE MARTIN MATTHEWS

COLES GROUP THINUS KEEVE

CHATIME GROUP CARLOS ANTONIUS

HOYTS GROUP DAMIAN KEOGH

SOUL ORIGIN NICK PATRICK

SHOPPING CENTRE NEWS 15

ALCEON GROUP Richard Facioni, Executive Director Richard leads Alceon Group’s principal investment team, with a particular focus on retail and consumer investments. He is an investor in and director of an extensive portfolio of operating businesses, including traditional and multi-channel retailers, pure-play e-commerce platforms and a network of over 1,000 stores that collectively generate c. $1.5 billion in annual sales: His directorships include: •

E xecutive Chairman, Alquemie Group (including LEGO Certified Stores, SurfStitch, Ginger & Smart, Pumpkin Patch)

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Chairman, Mosaic Brands Limited

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Chairman, Cheap as Chips Discount Variety Stores

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Investor, Marlin Brands

Do you think the government has done enough to assist the retail industry? If not, what would you like to see happen? I think they have done a pretty good job. I don’t believe in company-specific bailouts and am pretty nervous about industry-specific assistance programs without good reason. While I think they were probably a little slow to move and there have been issues with how the initiatives work, particularly JobKeeper and the Commercial Tenancies Code of Conduct, overall I believe the government has done what the industry needed to get through this. That doesn’t mean, of course, that every retail business will survive – but this isn’t about ensuring the survival of every business. It’s about ensuring the longevity and viability of the retail sector.

In your opinion, do you think shopping centre landlords have done enough in assisting retailers, and what has been your experience? It’s actually been quite mixed and there’s a spectrum, which you would expect when you essentially have a series of bilateral negotiations going on. At one end, we have landlords who are sympathetic to the issues we’ve faced as tenants. They have been willing to work with us constructively on payment terms and rental structure, both during the period we may have been forced to close our stores and during the transitionary ramp-up phase that will happen when we start re-opening. Other landlords are taking a tougher stance and are being less sympathetic to the fact we closed our stores, saying it was our decision to do so, notwithstanding government advice to our customers and our teams to stay home for non-essential reasons. The discussions will go on for some time and we will end up with different outcomes with each landlord. But there’s no question this experience and event will permanently change the landlord/tenant relationship and how future leases are written. 16 SCN

In what ways can shopping centre landlords assist your business in the recovery phase? There are three distinct phases we need to be thinking about, and discussing with our landlords: 1. The closure phase, being a period during which no or minimal revenue is being generated. We need to agree what constitutes a fair rent during that period; 2. The recovery phase post store re-openings, being the period where revenue rebuilds. We need to ensure rents reflect the ramp-up in foot traffic and revenue over time, noting we believe it will be some time before foot traffic normalises; and 3. The longer term post the recovery phase. We need to address the likely long-term impacts on consumer behaviour resulting from this crisis. The discussions with landlords need to cover all three phases, as they are all linked, and there is clearly a tension between what tenants will view as fair and what landlords will view as fair. Ultimately, however, both sides need to work together to find mutually acceptable commercial outcomes. COPYRIGHT©

RETAIL Q&A How important is the company’s online presence and have you experienced an increase in online sales due to COVID-19? We’ve historically had relatively low online penetration across our traditional retail businesses, however, we’ve seen two trends through this period. First, customers have engaged much more with online, for obvious reasons given social restrictions, spending more time at home, store closures, etc. As a result, we’ve seen significant growth in online and I expect much of this increased penetration will continue post COVID-19. So, there has been, I believe, a structural shift to online by the consumer. Second, with stores being closed, a lot of retailers, ours included, have taken the opportunity to accelerate their online growth through further investment in their online platforms, customer acquisition and category/product expansion. We’ve all been forced to become better online retailers in a very short timeframe. So, we’ve seen an acceleration of our customer’s transition to online, and an acceleration of our online growth strategy. Both trends are, I believe, permanent structural shifts. The flipside to this is that most retailers are probably planning to have fewer bricks-and-mortar stores in the future than would have been the case before the crisis.

Has the business introduced any new technologies to help communicate with its team members and customers? Definitely, across the board. With teams working from home, we’ve all become pretty adept at video conferencing and virtual meetings, whether it’s Zoom, Teams, etc and using group chats. The positive is, while we can never replace the benefits of physical meetings, we’re all a lot more comfortable using technology to get the job done.

Ginger & Smart

How do you think customer spend and shopper habits will change? I think we’re going to see a few changes after this. We will definitely see the increased penetration of online. While it will naturally pull back as physical stores start to re-open, I think it will settle down at a much higher level of penetration than previously. I also think the emotional impact of this event will change consumer behaviour. I think we’ll see consumers with more of a conscience. We’ll see the continuation of the shift away from consumerism and towards sustainability and sourcing – trends that were already well underway before COVID-19. There will also be the economic impacts of what we’ve been through and the aftermath. If we enter a protracted recession and a period of high unemployment, that will have the inevitable effects on consumer behaviour.

What lessons have you learned from this experience? Always be ready for the unexpected and be ready for the next crisis. Be match fit, as we like to say. No one saw this crisis coming, especially straight after the terrible bush fire disaster. No one knows what the next crisis will be, nor when it will happen, but we know it will. And we need to be ready. When a crisis does hit, be nimble, be responsive and take fast, decisive action. That’s what we did across all our businesses. That speed to act and decisiveness will allow us to get through this crisis and be better for it.

What are some of the positives you can take away from this experience? First, I’ve been amazed watching the teams in each business step up and do what needed to be done. Everyone has worked incredibly long, stressful hours, well beyond what was asked of them. You really get to appreciate the quality of the people you have on your team and I’m truly grateful to all of them. Second, with our stores closed and not having the daily cut and thrust of retail to deal with, it has given us the opportunity to step back and think. Something you rarely get the chance to do in retail. So, we’ve done quite a bit of strategic planning. Now is the time to be thinking, how do we, as a business, best position ourselves for the 'new world' once we get through this, knowing that things are going to be different? What do we look like today, what do we need to look like in the future to be successful and what is the pathway to getting there?

What is your outlook for the retail economy over the next 12 months?

We’ve also invested more in our customer communications. We’re upgrading our Electronic Direct Mail (EDM) platforms and using Artificial Intelligence (AI) to better personalise our interactions with our customers. We’ve also seen an increased shift to mobile devices through this period, so we’re also investing in developing mobile apps, so we can better engage with our customers through those devices. COPYRIGHT©

I believe it’s going to be a slow rebuild for a lot of retailers. We know social distancing is going to be a fact of life for some time. That will have a prolonged impact on traffic in shopping centres and how retail stores physically operate, as there will be a lot of restrictions we will need to be mindful of – maximum customers in stores, use of change rooms, enhanced sanitation, etc. The slow rebuild will be exacerbated, I believe, by reduced discretionary spend, due to higher unemployment, the time it takes for the economy to recover. So, I think the next 12 months are going to remain challenging for many retailers. The question everyone is asking, however, is what happens longer term, beyond the next 12 months? Online will continue to benefit from the slow rebuild in physical retail. And I believe retailers selling essential goods like groceries, will be less affected than those selling more discretionary product. SHOPPING CENTRE NEWS 17

BRAND COLLECTIVE Martin Matthews, CEO Martin Matthews is the CEO of Brand Collective, which owns and operates iconic Australian and international brands including Superdry, Shoes & Sox, Hush Puppies, and Clarks and Volley. Martin has a diverse background in Retail and Consumer Goods spanning 20 years, having started his career as a strategy consultant for Accenture advising clients like Coles Myer, Cadbury Schweppes, Campbell Arnott’s and Foster’s Group on a variety of strategic and operational issues.

Can you tell us a bit about Brand Collective? How many retail sites do you have in Australia? Brand Collective operates more than 100 retail stores around Australia making up about 60% of our revenue, with our online business and wholesale business to major independents and department stores making up the rest. Through our Shoes & Sox and Clarks businesses we are Australia’s largest specialty Kids’ Footwear retailer. Our Hush Puppies, Julius Marlow and Shoe Warehouse businesses are market leaders in comfort and dress footwear, and a lot of our recent growth has come from our Lifestyle brands business which includes Superdry, Volley, Elka Collective and Mossimo.

What impact have the COVID-19 restrictions had on your business? Have your sales increased or decreased? Given we operate in “non-essential” categories, COVID-19 has been devastating for our overall retail business with our stores closed from early March when Stage 3 stay-at-home orders were enforced. While we have seen an uplift in online sales, it is not nearly enough to compensate for the loss of sales from our store network. Retail businesses like ours have very high “operating leverage”, that is high fixed costs and relatively low operating margins. As a result, even small declines in sales have an enormous impact on profitability. We are also a vertical business, manufacturing and importing most of our product – so we have the added challenge of dealing with the sharp fall in the Australian dollar, adding significantly to our cost of goods. These are extremely challenging times for businesses like ours. 18 SCN

In what ways has Brand Collective had to adapt during the COVID-19 crisis? Like most retailers, the closure of our stores has been a very unusual experience, but it has forced us into new ways of working. It has given us the opportunity to focus more of our attention on our digital business, which for some of our brands had realistically still been a lower priority than our much larger wholesale and retail businesses. We have always prioritised a culture of “manage outputs not inputs” for our broader team and I think that’s helped in the transition to working from home. There’s a high degree of trust in our team and we already had widespread adoption of cloud-based communication tools like Microsoft Teams and Trello that had made remote working relatively seamless.

RETAIL Q&A of vacancies would be bad for retailers but catastrophic for property valuations and the more support landlords can provide during the crisis, the less likely we will be in that position down the track. Coming out of the crisis, I would like to see a joint effort between retailers and landlords to encourage shoppers back to centres. The public messaging around the risks of the virus have created huge anxiety for many shoppers, and we have a lot of work to do to ensure we can provide a safe environment for shoppers and also to give them confidence that we have done so.

How do you think customer spend and shopper habits will change post COVID-19?

scheme and we’re very grateful for that support. The area that perhaps has been neglected is leasing – while the Code of Conduct and land tax concessions for smaller retailers has been a step in the right direction, for larger retailers and landlords themselves there is still a lot of uncertainty about how to handle this crisis. While not normally the government’s role to get involved in commercial negotiations, given their role in impacting foot traffic in shopping centres through the lockdown measures, we would have liked to see more specific support for landlords conditional upon that being passed on to affected tenants to a set of consistent and transparent guidelines.

What has been your experience with shopping centre landlords during the crisis and what would you like to see in the recovery phase? Many landlords have been incredibly proactive and have worked very closely with us to agree new terms (primarily turnover based rents) that provide direct proportionality between the impact to sales and foot traffic and our occupancy costs. Given the uncertainty of trade throughout and in the recovery period for the COVID crisis, we believe this to be the only fair way to operate and ensure the financial sustainability of retailers. It also has the benefit of directly aligning retailer and landlord interests during the recovery period – the more foot traffic we can jointly get back, the better off we all become. At the other end of the spectrum, some landlords have largely sought to avoid providing specific support. I fear that if this is widespread, many retailers will not survive the crisis, leaving the entire shopping centre ecosystem in a less healthy position on the other side of the crisis. High levels COPYRIGHT©

Undoubtedly, there will be a permanent shift toward digital channels. One of the most interesting things I’ve observed is the level of comfort now around new communication methods and particularly videoconferencing. This has led retailers to new service innovations. For example, in our Kids’ Footwear business Shoes & Sox we launched online video-fitting appointments managed by our sales assistants from their homes. Our first week of appointments booked out in less than an hour. I think we’re going to see a lot more live chat and video chat that brings the digital experience closer to the in-store experience. I still maintain the view that shopping centres are important social hubs and most shoppers will want the convenience and connection that comes with face-to-face contact. That said, this crisis has only increased the competition centres have with digital channels, so we will all have to work harder to ensure we maintain a stimulating and differentiated environment for the shopper in our physical locations.

What is your outlook for the retail economy over the next 12 months? No doubt consumer confidence will be dented by the crisis and there will be a long recovery period. That said, I’m always looking for silver linings and I do think that retailers that are able to adapt quickly to the new environment will continue to thrive. Consumers will be looking for human connection and stimulation more than ever, and great retailers know how to deliver that!

What is one thing you are looking forward to doing once restrictions are lifted? I’m hoping the AFL season will have re-started and the pubs will be open so I can watch a Swans game at my local, the Rising Sun Hotel in South Melbourne – which also happens to be the gathering point for Melbourne-based Swans fans! SHOPPING CENTRE NEWS 19

CHATIME GROUP Carlos Antonius, CEO Carlos joined the Chatime Group in June 2015 and is charged with overseeing the Australian operations for the Chatime and Goobne brands. Carlos has more than 25 years’ experience in the franchise and retail industry, including roles with Nando’s Australia as General Manager and Director. Carlos’ experience in developing retail brands was honed by his previous experience within the Australian advertising sector, developing strategy and integrated campaigns for many Australian retail and international FMCG brands.

Can you tell us a bit about your retail business? Chatime Group operates a mixture of franchise and company operated businesses including Chatime bubble/iced tea and Goobne Korean oven roasted chicken in the Australian market located in a mix of strip and shopping centre locations. Chatime has 125 locations across Australia excluding Tasmania and one Goobne restaurant location at Darling Square, Sydney.

Have any of your retail locations had to close due to COVID-19 restrictions? Since March, all Chatime locations traded on reduced trading hours, however by April 12 we had 37 locations close temporarily due to a significant drop in foot traffic predominantly in CBD locations and high-density Asian suburbs around the country. Goobne continued to trade via take away and food delivery aggregators, however, we closed this restaurant temporarily on April 5. We are continually reviewing trading conditions and with federal and state government assistance packages considering to open more locations as conditions improve, while maintaining aspects of social distancing protocols for the safety of our customers and staff.

What impact have these restrictions had on your sales? Sales across the Chatime Group have declined since the beginning of March, equating to more than 60% decline during the past six weeks. Interestingly, we have a small number of strip locations scattered across the country that are trading positively from a like 4 like (L4L) performance and due to the growth in food delivery aggregators sales a significant increase in our national average ticket value (ATV).

How has Chatime Group adapted to some of the challenges the business has faced during this downturn? To ensure we protected the working capital of our business 20 SCN

partners during the COVID-19 pandemic, we provided various support assistance to partners including reduced royalty and marketing fees, waiving marketing fees on delivery aggregator sales channels and providing extended payment terms for the months of March and April, with a view to extending post this period. Our business development/finance teams are working more closely than ever on daily profit and loss reports and cash flow projections for all locations. At the same time, we stood down the majority of employees across central support in late March for a onemonth period, however due to the JobKeeper stimulus package all eligible employees (with the exception of two at Central Support) are now returning to work on reduced hours.

What are your thoughts on the various government stimulus packages? The federal and state governments should be commended for their swiftness and alignment ensuring the community received support including; rental and mortgage assistance, JobSeeker and JobKeeper stimulus packages and the number of business incentives including instant asset write off, payroll tax waivers/deferment and working funds among many assistance options. The Jobkeeper stimulus package is COPYRIGHT©

RETAIL Q&A In your opinion, in what ways will retail shift, and what is your outlook for the future of shopping centres?

enabling Chatime to return many employees back to work and, more importantly, providing our business partners (franchisees) additional stimulus assistance to reopen locations that are temporarily closed that have seen a significant decline in revenue.

In what ways can centre landlords assist your business in the recovery phase? While the federal government's Rental Relief Package legislation is welcome and provides a framework for landlords and tenants, we initiated an approach with national shopping centre landlords requesting rental relief percentage approach to rent utilising a location's calendar year 2019 for base rent, promotional, outgoings and storage be applied to the sales achieved in March 2020. In most cases, this results in a percentage rebate request similar to the relative downturn in sales and is consistent with the government’s communication on co-operation between landlords and tenants. The new mandatory code with the requirement to defer a portion of rent to later in the rental term will have adverse impacts on business partners (franchisees) to not only pay monthly rental amounts and any rental deferment amounts with no surety of when and if revenue will revert to back previous periods. As to extending lease terms this will also cause challenges to franchise and franchisors' agreements where franchisors hold the main lease and licence a location to franchisees, in the event franchisees don’t wish to extend their franchise agreements to align with any lease extensions, franchisors may be left vulnerable to operating locations for short periods of time. With the option of collective bargaining available to retailers, l suspect there will be much discussion surrounding this option for retail groups to join forces together or seek the support of a key industry body to drive fairer and more equitable outcomes for parties. COPYRIGHT©

Business and consumer confidence will be soft for quite a period of time, therefore it’s more imperative than ever that landlords and tenants work together to find equitable commercial solutions that enable businesses to continue to trade with improved commercials where landlords receive income without a significant number of vacancies appearing within shopping centres. There will be a consolidation across the QSR and broader retail landscape and in particular within the bubble/iced tea category. The ‘dizzy’ commercials some entrants would pay in rents and manage their business costs wasn’t sustainable, the consolidation across the retail environment will provide a more balanced and level playing field for businesses doing the right thing for all stakeholders, while contributing to rebuilding our economy together.

What lessons have you learned from this experience? Not necessarily a lesson learnt but reaffirmed; the courage, strength and perseverance of our business partners and employees who continued to serve customers within their communities. COVID-19 poses many challenges but is testament to our broader network to continue to service the public in a safe environment with a product and experience they love, to escape the challenges of the COVID-19 pandemic.

How have you and your family personally coped with social isolation? With more than 25 years in franchise and retail, l cannot recall when l have been home as consistently as now. With work from home options available to our workplace, l have relished the opportunity with the additional time to support my wife and children; including children’s homework, extracurricular studies and loads of home cooking. I’m definitely more relaxed and have enjoyed this time, however l’m looking forward to restrictions slowly being relaxed and the “new normal” coming into play; perhaps my family is secretly wishing this as well!

What are you looking forward to doing once social distancing restrictions are relaxed? Zoom, Facetime, teleconferences and the like all have a place, however I'm looking forward to spending time ‘face-toface’ at the coalface with our business partners, employees, customers and suppliers. With many key initiatives to be deployed post the COVID-19 pandemic, supporting our partners post the recovery phase will be our number one business priority. SHOPPING CENTRE NEWS 21

COLES GROUP Thinus Keeve, Chief Property & Export Officer Thinus is Coles Group’s Chief Property & Export Officer and has considerable commercial experience in the retail, strategy and liquor sectors. Thinus has held various senior leadership roles at Coles since joining in 2010. He is accountable for delivering innovation and transformation in Coles’ store network, including the development of new formats such as Coles Local. Additionally, Thinus manages key growth opportunities including the Coles Export business, as well portfolios including energy, sustainability and Indigenous affairs.

How have the COVID-19 restrictions impacted your business? The pantr y-stocking phenomenon experienced by all supermarkets is welldocumented and had a positive effect on our sales for the third quarter. Volumes were up, and our supply chain team worked incredibly hard to move additional stock into our stores. This was all done without the normal six months of planning that usually goes into events like Christmas or Easter.

What are some of the challenges Coles has had to face during the past month? We saw demand increase significantly. Our first priority was implementing rapid changes to our operating model to get as much stock on the shelves as possible with minimal disruption to our customers, ensuring we had a plan to look after all vulnerable Australians. We mobilised a dedicated team tasked with rapidly increasing supply chain capacity, modifying in-store procedures and implementing increased cleaning and social distancing measures. All these changes required careful consideration of the flow on effects, and then had to be communicated in a matter of hours to more than 120,000 team members, about 400 landlords and some 20-million customers. In light of these challenges, our team members have really done an outstanding job over the past two months and have truly risen to the occasion in helping to feed Australia during this crisis.

In what ways has Coles had to adapt during the COVID-19 crisis? Australians all over the countr y depend on our ser vices each week. We ver y quickly had to adapt our offer to meet significant challenges as a result of COVID-19. 22 SCN

We immediately engaged with suppliers to ensure availability as well as government and landlords to review deliver y and trading hour restrictions. We’ve hired an additional 12,000 team members across the countr y to assist with the increased demand we saw, and engaged our team and customers to implement purchase limits. The cumulative effect of these measures meant we were able to ensure ever yone had access to food and groceries. In line with Department of Health guidelines, we’ve also limited the number of customers that can enter our stores, so we can continue to safely ser ve as many of them as possible. While we’ve seen challenges in implementing these restrictions, they have generally been well-received by customers.

Have all locations been trading as normal? Have you increased or reduced trading hours? As an essential service, almost all our supermarkets, liquor stores and Coles Express sites have continued to trade, helping to feed Australians during this challenging time. We very quickly adapted our opening hours to facilitate restocking, then introduced our highly successful Community Hour, allowing elderly and vulnerable customers, as well as COPYRIGHT©

RETAIL Q&A emergency services workers a dedicated hour of shopping in the first hour of trade. To support social distancing, we’ve extended trading hours and have had support from several state governments and landlords to trade on public holidays, where we traditionally hadn’t been able to before. We’re now encouraging our customers to be 'safe, speedy shoppers' and to move quickly through our stores so we can maintain social distancing.

What are your thoughts on the government stimulus package and JobKeeper schemes? Coles is very supportive of any measures the government is taking to ensure the economy keeps moving during this crisis and, in turn, makes the recovery process easier when we reach the other side.

In what ways is the business currently communicating with its customers? Does social media play a role? Coles uses all types of channels to communicate with our customers, including advertising, in-store signage, social media and mainstream media. The COVID-19 pandemic made us pivot from using these channels for traditional marketing and sales messages, to more closely focus on messages of a community service nature. Additionally, we’ve used these channels to reach Australians and help them with home meal ideas, such as our What’s for Dinner? campaign, as well as provide important information about new social distancing measures and trading hours.

customer work schedules changing and employers offering more opportunities to work from home or outside of the traditional nine to five workday. Online retailing will also see ongoing growth as more customers get comfortable with the idea of having goods and services delivered – something they may have experienced while in isolation. This shift will be supported by our partnership with online food retailer Ocado and the development of two highly automated fulfilment centres in Melbourne and Sydney.

How important is the company’s online presence and have you experienced an increase in online sales due to COVID-19? The COVID-19 pandemic has made it very clear that Coles offers an essential service to the community and plays a vital role in sustainably feeding Australians. It’s for this reason that we decided to repurpose Coles Online to cater for some of the most vulnerable members of the community. Our Coles Online Priority Service (COPS) was made available to existing customers aged 70 years and over and to other vulnerable groups via government departments, such as the NDIS and My Aged Care. This service, along with our Coles Community Box, were a huge help for many in the community who may have been in lockdown or unable to make it to a store.

How important is the role shopping centres play in providing essential services to the wider community? A shopping centre is a safe, one-stop option for everything customers need. In light of current circumstances, shopping centres are also acting as a community hub where people can go and complete their weekly shop to regain a sense of normalcy in their lives.

How do you think customer spend and shopper habits will change after this experience?

Are there any stand-out ‘acts of kindness’ you have witnessed from the industry?

Our busiest days of trade are generally on the weekend, however, since the pandemic began we have seen customer visits smoothing out across the week. This is in part due to

Our landlords have worked collaboratively with us to ensure we can continue to provide an essential service to the community; their support and responsiveness have been outstanding! For example, we’ve had multiple landlords head down to the local hardware store to pick up tape and bollards – helping our store teams to manage customer numbers as we implemented social distancing measures. We’ve also had countless examples of selfless acts of kindness from our team members who have done an outstanding job supporting our customers and each other during this time.

What are some of the positives you can take away from this experience? We’ve seen examples of customers bringing our team members gifts and going out of their way to thank them for their incredible efforts. I hope that some of the kindness we’ve seen from members of the wider community continues once these events subside. Additionally, this experience has allowed us to spend more time with family and loved ones, while making sure we are looking out for vulnerable members of the community at the same time. Coles’ purpose to sustainably feed all Australians to lead healthier, happier lives has never been more relevant and if we all continue to all look out for each other, I know we can get through this together. COPYRIGHT©

SHOPPING CENTRE NEWS 23

HOYTS GROUP Damian Keogh AM , President & CEO Damian is the President and CEO of The HOYTS Group, a role he has held since 2014. As part of the Chinese owned Wanda Group, which owns 12% of the world’s cinemas, Damian has overseen a dramatic re-investment program in the HOYTS cinema circuit. Damian was Chairman of the Cronulla Sharks NRL team from 2013 – 2017, including the club's first premiership in 2016. A former professional sportsman, he enjoyed a distinguished career in the NBL and represented Australia on more than 200 occasions in basketball, including three Olympic campaigns.

Can you tell us a bit about HOYTS Group? HOYTS cinemas began in Australia in 1909. As Australia’s largest national cinema brand, today we operate 40 cinemas in Australia and 13 in New Zealand, with more than 400 screens. Collectively, we see more than 20 million admissions per annum. Over the past six years, more than $300 million has been spent in upgrading the cinema experience with powered recliner seats in every cinema. In the process, HOYTS has grown market share and been recognised as the leader in cinema innovation in Australia. HOYTS also owns and operates the iconic Val Morgan cinema and outdoor advertising company (VMO).

What impact have COVID-19 restrictions had on these operations in terms of trading hours and sales? We saw a rapid rise of the COVID-19 virus in early March which led to us implementing significantly reduced capacities and social distancing measures in our cinemas on March 15. On March 22, the Australian government mandated that cinemas close as part of a range of measures to limit the spread of COVID-19. Prior to that, we had seen several Hollywood new release titles move to the back end of 2020 as cinemas were closing in major countries in the northern hemisphere. We witnessed a large decline in visitor numbers from the beginning of March. The industry box office was down 47% on the same time last year. From March 22, HOYTS cinema revenue ceased entirely.

What are some of the challenges HOYTS has had to face during this period of closure? The biggest initial challenge, once the cinemas were 24 SCN

closed, was to effectively and appropriately communicate with all our staff. More than 2,600 employees had to be stood down. Our business has grown strongly in recent years on the back of capital investment in renovating our cinemas. Equally, the cultural move to a strong customer-centric operating model was led by our frontline staff who are passionate about our business and our brand. It was a challenging time. Secondary, without a stream of revenue, management turned its focus to other cost reductions across the business. A large focus of this has been with our landlords, as leases are one of our main fixed costs.

What are your thoughts on the government stimulus package and JobKeeper schemes? The JobKeeper scheme has provided us with a method to ensure we can keep as many staff as possible and get the business up and running quickly once we re-open. At this COPYRIGHT©

RETAIL Q&A

to staff. Among these are frequent video business updates by me to all staff.

In your opinion, do you think shopping centre landlords have done enough in assisting retailers during the crisis? Even though we were mandated by government to close our cinemas, there has been little assistance required from landlords. However, the code does state that the principles of the Code should nevertheless apply in spirit to all leasing arrangements for affected businesses, having fair regard to the size and financial structure of those businesses. To date, most landlords have been willing to work with us in good faith and under the spirit of the code.

What has been your experience with shopping centre landlords during this crisis? We are in the process of negotiating lease agreements through this challenging time. We are anticipating a minimum of three months' compulsory closure. Once we open it may take some time before our business ramps up to pre COVID-19 levels, depending on when the social distancing measures will be relaxed and when we can get access to new movies, given we are part of a global supply chain with respect to movie content. stage there are not a lot of other specific stimulus benefits for cinema operators.

Do you think the government has done enough to assist the retail industry? If not, what would you like to see happen? The government’s guiding set of principles on the negotiations between landlords and tenants does not directly apply to HOYTS as we turnover more than $50 million per year. However, it is a good start for ensuring that there be an understanding through this crisis that the pain needs to be shared between the parties. Our industry is in a unique position. Prior to the COVID-19 crisis, our industry generated a $2 billion annual turnover, employing about 12,000 people. Cinemas are a cultural institution – we are the number one out-of-home entertainment experience. However, since the mandated shutdown from government, our industry has no alternative means nor business model for revenue generation. In addition to this, we rely on a global supply chain, meaning we are dependent on countries such as the US, UK and China being ready to reopen around the same time that we are to ensure we see a solid line-up of movie content. While we understand the immediate public health necessity of cinema closures, we desperately need financial relief to maintain the viability, and survival, of our entire industry.

In what ways can shopping centre landlords assist your business in the recovery phase? Hopefully, our landlords will recognise that the cinema is a vital part of the social experience of shopping centres and helps drive footfall. We will need rent assistance during closure as well as in the re-building phase as we ramp up our business.

How will HOYTS cinemas adapt in response to COVID-19? The COVID-19 crisis did not come with a business play book. Most businesses were faced with a scenario that was unimaginable. The concept of ‘social distancing’ is counter to most of the pleasurable pursuits humans have – travel, dining, socialising, shopping, sport and entertainment. Once we re-open we will need to ensure we can create an environment for the public that makes them feel safe and secure in our venues.

What are some of the strategies the business will put in place for recovery? HOYTS is aiming to re-open in July. We understand this date is contingent on government approval. We also need the major global studios to have new movies for our customers. When this happens, we will need to ensure we have an environment that is safe for our staff and our customers. We have created a 20-point safety guide list to achieve this.

How is the business communicating – have you introduced any new technologies to engage with team members and customers?

What is your outlook for the retail economy over the next 12 months?

HOYTS is continuing to engage with our customers through a variety of social media platforms. Customers are keen to know when we will re-open. Staff communication has been a strong focus throughout this crisis. Across the HOYTS Group we utilise the Workplace by Facebook platform as a highly effective and immediate staff communication platform. Regular updates are provided

The sooner we can create a safe environment for people to begin to re-establish their normal life patterns, I have no doubt that retail and cinema will bounce back and bounce back strongly. There is a great line up of movies coming over the next few years. HOYTS has invested significant capital to renovate and build new cinemas that are world leading and provide a great customer experience.

SHOPPING CENTRE NEWS 25

SOUL ORIGIN Nick Patrick, National Leasing and Development Manager Nick Patrick is the National Leasing and Development Manager for Soul Origin. For the past 13 years, he has worked in the retail property industry for both landlords and retailers. His three years with Soul Origin has seen the company expand nationally and substantially grow its network of stores across Australia by more than 55%. Prior to working with Soul Origin, Nick worked in retail and project leasing for institutional REIT’s AMP Capital [Leasing Executive] and The GPT Group [Project Leasing Executive].

Can you tell us a bit about Soul Origin and how many retail sites it operates in Australia?

In what ways has the business had to adapt during the COVID-19 crisis?

Soul Origin is a family founded and run franchised food business. We operate a network of 115 stores across all mainland Australia, enjoying strong growth since opening our first outlet in 2011 in Sydney’s Hunter Connection. The brand’s appeal to consumers is driven by our mission to provide consumers with nutritious on-the-go meals and our objective to be Australia’s highest regarded and most consistent shopping centre-focused coffee experience.

Due to the location of our stores, predominantly food courts, Soul Origin has preferred to avoid third party aggregators and deliver y platforms. Aggregators’ exorbitant costs add challenge to businesses already operating with high overheads. We have used COVID-19 as an opportunity to trial a number of third party platforms. To encourage usage, Soul Origin has agreed to pay all of these platforms’ fees for franchise partners and waive franchise fees for all third party platform sales for a minimum two-month period. This has given us valuable insight and data to leverage in a post COVID-19 world to drive sales and improve business reach.

What impact have COVID-19 restrictions had on your business? COVID-19 has had a detrimental impact on our business in the short term, with revenue decline broadly reflecting the fall in foot traffic of shopping centres. We note that locations adjacent to supermarkets have held up better than locations that are in food courts or parts of shopping centres that rely on department stores, fashion and general merchandise, to drive traffic. A food-based business has a very large inventory with a relatively short shelf life so it is important to maintain turnover.

How can shopping centre landlords assist your business in the recovery phase? Shopping centre landlords should now take a deep dive into the details and challenges of a retailer’s business. It will be a crash course, gaining detailed understanding of the highly differentiated businesses occupying their properties. Never before have landlords had such opportunity to access many retailers’ data at such a granular level. Material might include weekly sales reports, P&Ls, staff rosters and other information germane to each enterprise. Actively seeking out a retailer’s data and understanding their business models will allow a landlord not only the tools to best support each individual retailer, but also to emerge from the pandemic with a skillset to enable repositioning and remixing their malls to face the next decade. 26 SCN

RETAIL Q&A

converting many casual users to frequent users. This will accelerate the digitisation of the way in which we socialise and interact. While this may pose a risk for bricks-and-mortar retail, there are also strategic opportunities for future owner investment and remixing. One might predict that today’s influencers will become as important in driving traffic to shopping centres in the future as department stores were for the past five decades. This represents an opportunity to reposition, properly catering for Millennials – a vital customer base. They, in five years’ time, will become the world’s engine room for consumption and sales growth.

What (if any) opportunities have opened up for your business?

What are your thoughts on the government stimulus package and JobKeeper schemes? Soul Origin supports initiatives that the government has put in place. However, we are finding that a high proportion of stores receive only a very modest benefit from JobKeeper. The food catering industry has a very high proportion of casual and temporary migrant visa employees who do not qualify for support in our industr y. This situation is not exclusive to Soul Origin but is an issue right across food catering and hospitality.

How do you think customer spend and shopper habits will change after this experience? We are not alone in seeing a number of trends in retail prior to COVID-19 accelerating as a result of the pandemic, particularly rising online retail and shifting of customers towards web-based purchasing. As well, those who lag in adopting social media platforms will be forced to change their behaviours with social distancing. Digital communication and social media apps have seen spikes in usage and are COPYRIGHT©

Long term customer acquisition has become a real opportunity for Soul Origin. While not all Soul Origin stores could trade throughout the pandemic, even at its worst, 60% of our retail network remained open and trading. Generally, more than 70% of the network was open, despite the worst trading conditions our business has seen. While there was not the volume of sales required to cover ordinary business costs, by being one of the few food court retailers who did remain open, Soul Origin gained access to new customers and trial users. For many customers, it was the first time they tried a Soul Origin coffee. We back our product and our ser vice. We expect that many of these new customers will now become adopters and advocates.

What is your outlook for the retail economy over the next 12 months? I believe we are in for a very turbulent 12-month trading period. Should Australia enjoy a rapid winding-back of social distancing, I expect to see a short term “sugar hit” to retail sales. However, we should expect this to pull back with the recognition of an economy in recession, high unemployment and subdued consumer sentiment. Retail food will be the canary in the coal mine for retail recovery. Visitors to shopping centres will spend $9.90 on a panini or salad rather than $300 on a dress or a new television. If retail food catering struggles, it is fair to expect there will be much other commerce where pain will be many times amplified. If the winding-back of social distancing is protracted, I expect this pain to be slow and drawn out. Recovery will reflect the rate at which Australians return to, or can find, employment. SCN SHOPPING CENTRE NEWS 27

NRA COMMENT | COVID-19

10 key actions for retail recovery

s lockdown restrictions begin to be lifted and businesses reopen, the retail community is determined to maintain the highest safety standards possible. In addition to safeguarding the community from exposure and infection, retail also has economic incentives to ensure businesses can come out of hibernation without interruption. The sector simply can’t afford a second wave of cases that sees restrictions re-imposed. This is underlined by the fact that, following consultation with our members across Australia, the retail sector lost an estimated $1 billion in the month of March alone. Treasurer Josh Frydenberg announced in early May that each week level three lockdown restrictions remained in place the economy would shed $4 billion overall. Conscious of the need to ensure that both retail workers and Australian shoppers remain protected, several industry groups have teamed up to devise the COVID-19 Retail Recovery Protocol. The Shopping Centre Council of Australia (SCCA), National Retail Association (NRA), Shop Distributive and Allied Employees Association (SDA), Pharmacy Guild of Australia (PGA) and Australian Retailers Association (ARA) have jointly developed the Protocol to provide a consistent, practical and public health led guide for shopping centres and retailers that continue to trade, are re-opening or are preparing to re-open as COVID-19 restrictions are eased. The key principles guiding the development of the Protocol align with the retail industry’s approach to date, which continues to be prioritising public health and safety to protect people against infection, compliance with public health guidelines, working with governments and public health authorities, and helping to prevent the spread of COVID-19. As more retail stores start to reopen, which will see a surge in customer demand, the community should have confidence their health and safety is a 28 SCN

priority for retailers, including how they purchase goods and interact with staff. Each of the industry associations involved have devised 10 key actions that retailers and shopping centres should implement. It should be noted that key actions will var y slightly for businesses across the countr y. This is due to the obvious fact that each shopping centre, retailer and retail premise differs in factors such as location, tenancy mix, operating hours, size, customer visits, open air/enclosed spaces, customer access points, carparks, loading docks and co-location with public transport facilities. The 10 key actions recommended include: 1. Making alcohol-based hand sanitiser available at key locations such as store entrances, building entrances, customer service desks and food courts; 2. Increasing frequent cleaning and disinfecting of regularly used objects and hard surfaces (eg. payment registers, ETFPOS machines, hand-rails, bathroom door handles, shelves, shopping trolleys, counters and benches, food-court tables, staff rooms) and other key hygiene measures (eg. waste disposal); 3. Facilitating and encouraging social distancing guidelines in accordance with government or public health authority directions, which is currently a distance of 1.5m. Actions could include signage ‘reminders’, one-way queueing, and ground markings for queueing; 4. Ensuring public gathering limits in accordance with government directions are adhered to, which is currently no more than one person per 4m2 in stores inclusive of staff, and can be maintained. Actions could include regulating access points, monitoring customer counts at relevant entrances and displaying signage; 5. Promoting contactless transactions such as ‘tap and go’ instead of cash for payments, facilitating distancing at counters and benches, and staff wearing disposable gloves when handling objects and money;

DOMINIQUE LAMB Executive Director National Retail Association 6. Monitoring and encouraging customer adherence to relevant public health guidelines by security guards and other personnel, which may also include police visits to shopping centres; 7. Continuing to focus on the community’s access to essential services such as supermarkets, pharmacies and health and medical facilities, especially for vulnerable people; 8. Daily check-ins with employees on their wellbeing, ensuring employees and contractors are properly trained and have access to relevant information and personal protective equipment. These check-ins will include monitoring customer behaviour to ensure retail workers are being treated with respect – abusive and violent behaviour towards retail workers will not be tolerated; 9. Fostering open and frequent communication between shopping centre management and retailers, including alerting each party to any government or public health authority directive, to assist authorities when required, and to continue to release information and provide guidance to employees and customers about good hygiene advice; and 10. Maintaining relevant essential safety measures such as air-handling systems, exit doors, emergency power supply, smoke alarms, sprinkler systems and fire-isolated stairs. If retailers and shopping centres take the above measures, we can provide the public with the confidence required that sees them returning to stores and avoiding the prospect of restrictions being re-imposed. SCN

We need to think beyond the ‘now’. Presently, our focus is on ‘getting back to normal’; but that won’t happen because ‘normal’ has disappeared forever. When the COVID-19 episode is all but over, a ‘new normal’ will be the order of the day. Those who plan for it will succeed; those who wait to see what happens will find it harder! Food & Beverage (F&B) has been and will continue to be impacted enormously. Many restaurants, cafés, food court operators and specialised food outlets, will never open again and others will fail in the coming months. Whatever happens, one thing is clear; the F&B component of our centres will never be the same. Two of the leading F&B experts in the country give their views on the future, what it entails for their industry and ours.

The next-normal for landlords: your importance as strategic leaders FRANCIS LOUGHRAN Managing Director Future Food

n the post-coronavirus era, every food business will have to plan, execute and continually adapt to the new reality of food and hospitality. Hospitality may never return to the close-quarter customer-inter face, casualness, generosity and personalised ser vice that we knew pre-COVID-19. Sales recover y may not eventuate fully, perhaps not until early 2021 or beyond. By the time this article is published, the intellectual post-mortem of COVID-19 will have begun and hygiene will remain top-of-mind for much of the community because the psychology of many customers has substantially changed in a very short period of time. Businesses big and small have been decimated, highlighting in no uncertain terms the precarious short-term cashflow cycles that many operators run on. Around the world, our individual daily routines have dramatically changed and entire industries reliant on human habit and behavioural patterns have been substantially impacted or even lost by government mandated lockdowns and societal fears of pandemic infection. There are many questions concerning the viability of our industry in its current format. Resolving them will not happen through the actions of the property industry on its own, but rather by a concerted and united approach requiring all stakeholders to think differently. 30 SCN

Based on an ABS survey, in the three weeks to April 4, Australia has lost about $5 billion in wages/salaries. This is due, in part, to about 700,000 people losing their jobs or having work hours cut. As the 'next-normal' emerges, restaurants can’t just rely on hampers of goods – they need to be able to offer something value-added (something they do themselves) as a point of difference.

Landlords must lead the way in strategic planning and operational support Landlords, food operators and customers all play a crucial part in the future success of how food businesses will recover, thrive and return to the nextnormal. As such, we must foster better relationships with our retailers, and in return demand their investment into our centres by following our lead in positive entrepreneurship, proactive marketing, health and safety, long-term planning and increased service-level provision that extends the customer experience regardless of short-term trends. The astute operators in the property industry will benefit from the COVID-19 Pandemic. Proactive stakeholders will benefit from hindsight and, in turn, will be stronger, leaner and more resilient as a result of the COVID-19 impacts on our daily lives. Disruption is nothing new to the food and beverage (F&B), service or

retail sectors over the past five years and it's our perspective that this trend will continue. Natural disasters, the rise of digital disruption, rapidly changing workplace practices and employment conditions have all contributed to a highly dynamic industry that can rise to the challenge of COVID-19 and come out stronger on the other side.

Hygiene is a marketable commodity We all have a very intimate relationship with our food – it requires us to use our hands and put things in our mouths. In the current climate of health and public safety awareness, we are now responsible for maintaining and promoting obvious health and safety protocols across our centres. If we are to maintain and grow our sales and footfall, ultimately protecting our rental incomes, we must ensure that we maximise our transparency of health and safety processes in an era of hyper-hygiene. Operationally, our teams will need to provide better transparency of process with clear lines of accountability (ie. hygiene supervisor), with clearly documented processes. Prominent use of new tech, that has been commonplace in medical practices for many years, may become mainstream for shopping centres too. Hygiene practices at an operational

FOOD FOCUS

level will form an indirect marketing tool in addition to being a positive message for all centres to communicate to their communities.

Effective immediately, hygiene, health and safety processes and procedures must be visible, obvious and well communicated. Hygiene, social distancing and its compound effect on design Typically, F&B design in the past ten years has been influenced significantly by styling and productivity. But our next normal may well include visible hygiene and social distancing as key parameters to be incorporated into new centre and redevelopment designs and new tenancy designs. It certainly needs to be incorporated into our design strategies and masterplanning processes. Common areas need to be perceived as not only healthy places to be but must also actively reinforce the messaging that our centres are safe places for our community to return to and remain in. Customer confidence is the key to COPYRIGHT©

Design solutions may need to consider less productive dining spaces as we increase the measure of safe seating

future success and a core component of this confidence will hinge on public spaces to provide a level of personal health reassurance at every 'nontouchpoint'. Most certainly this will come to include: • Productivity (ie. table spacing and seating efficiency) of dining areas both in common areas and individual tenancies will be moderated by the impact of COVID-19. Seating areas in dining room spaces can range from 1.8m2 per person to as little as 0.8m2 per person, but design solutions may need to consider less productive dining spaces as we increase the measure of safe seating in cafés, restaurants and bars. Existing operators that have dining rooms at lower ends of the above range, may have to reconsider seating plans with reduced seats, in order to maintain relevance to customers with a revised series of choice priorities. • Reduced sales and reduced profits will have to be countered by increased productivity and lower staff costs. Ultimately, this will change the service experience for our customers as we re-evaluate our expectation of servicestandards as a community. Never before have restaurants been required to

remodel their seating plan to comply with code relating to safe-seating distancing. This reduction in seating will reduce sales and this will not be made up by deliveries and pick-up sales as these are generally lesser spends (ie. no add-on, alcohol sales etc). • Queuing areas are likely to require social management for the foreseeable future. For fast casual and grab-and-go operators who see peak demand within concentrated time periods (ie. breakfast, lunch and dinner) ordering online in advance and skipping the queue is likely to be a key strategy to manage social distancing; existing order-online apps are already developing new improved formats. • F&B operators will need to present clean and uncluttered working areas. Property managers should ensure that each tenant has adequate back of house storage areas for their business. Deliveries, dry goods, staff effects and clothing are examples of what the customer does not need to see. Kiosk retailers that have sightlines into all sides of their business have even greater exposure to this issue. • Staff arriving to work in food premises are likely to need to change SHOPPING CENTRE NEWS 31

into uniforms, if this wasn’t the case in the past it will most likely be a necessary work practice going forward. Staff cannot be seen to be wearing 'street clothes' while working in foodservice operations. In order to ensure that a level of insulation exists, individual retailers and centres will need to ensure that staff facilities, change rooms and lockers are available for personal effects, away from the customer experience. • One of the short term trends that has been adopted by communities is an increased acceptance and use of delivery and takeaway dining. Future designs for many outlets are likely to include separation of delivery and takehome options from 'eat in' customer experiences, such as express windows, pickup lanes and third-party delivery (TPD) pick up zones. • Congestion points such as point of sale areas, queue zones and egress points will need to be significantly reconsidered. Building occupancies may well be revised but ensuring that internal footfall routes and flows are contactless will likely result in revised design-briefs going forward. Individual operators will most certainly want to revise their own queuing strategies. • Contactless experiences. From arriving in the centre’s carpark or visiting the bathrooms, centres will need to transition to a contactless environment. The process of 'pushing open' a bathroom door in our centres’ amenities has become unacceptable, overnight. End to end contactless and socially distant environments need to be factored into our planning. Even prior to COVID-19, some operators are exploring this potential business model; Starbucks in Toronto have recently opened their first pick up only store, with all orders placed via the Starbucks app. • Elevated drive through experiences are already a burgeoning food trend in the US as majors such as Starbucks and McDonald’s seek to advance the drive through experience. As we accelerate the acceptance of contactless retail, it is inevitable to think that brands will want to retain the essential customer and experiencecentric differentiation that is already a core component of their brand statements. One of the biggest assets for any property is footfall. Maintaining footfall will become 32 SCN

a by-product of the capability of our retail and food operators and their ability to adapt to the next-normal. High quality operators will become imminently preferred over a more dated approach as the 'she’ll be right' attitude quickly loses favour with society. For the operators who make it through this challenging period, some great lessons will be learnt.

Disruption management and reduced operating costs Disruption management is no longer a response only. We must plan for it and ensure that our operators’ business cases stand up to scrutiny. We must do this to ensure that our leases are protected and in turn protect a principle revenue source, rent. Our operators must be chosen for the calibre of their product and service as well as their business capability (including an ability to monitor and adapt) and retain a proactive approach to F&B retail. Sustainable business models must be identified to safeguard against any future outbreaks and disasters that impact on business.

Food delivery will form an ongoing component of future business for many outlets. Revenue diversification has literally been forced on to many of the food operators in our centres. If the COVID-19 crisis has done anything, it has been to strengthen the digital commerce landscape, including F&B. Many food businesses switched to delivery and takeaway as a sticking plaster response to the lockdown measures that impacted societies. As a consequence of this, Tamper Protection Device (TPD) platforms have now become an extension of the food service operation (in effect a modern-day waiter). Operators and the property industry must become familiar with TPD providers and their operating practices. They will continue to attract market share and physical presence in our centres, as such they must also reflect the operational standards that we are demanding of our food partners. Starbucks 'pick up only store'

Operators will need to ensure that their operations reflect the philosophies of the centre, as such contactless payment must become a standard capability. If cash only operators were an endangered species six-months ago, they must now be facing extinction.

We must ensure that these TPD providers reflect the hygiene and professional standards that we expect our customers to receive in our centres. Many small to medium size food operators will need guidance and leadership to navigate the required controls, processes and elevated code-compliance. (In Australia and New Zealand shopping centres, this represents the majority where 80% to 90% of F&B operators can be described as small to medium businesses.) First, there is a greater cost. More labour will be required to apply stringent cleaning and hygiene standards. Many small operators do not have the processes and skills to ensure their food businesses will continue to appeal to customers because of their visual hygiene standards and practices. Staff need to be re-trained in hygiene, safe-interpersonal skills and safe food handling skills; this carries a cost. Other costs include ordering-technology, food packaging, delivery costs etc. The higher the rent, the more pressure is placed on the retailer to extend their serviceplatform diversification to drive sales. For many operators, this will almost certainly result in the development of a more efficient staffing model to ensure reduced staffing costs and a lower number of staff in typically small working areas. Staff retraining and reskilling to reduce social interaction will most certainly become a factor of food service employment, as we look forward to potential code changes, it is highly likely that F&B servers and food handlers will be required to sit a food safety course in a similar manner to the current Responsible Service of Alcohol (RSA) requirements for licensed operators. Physical changes may require the installation of sneeze-guard style screens at counters and in some seating areas, the inclusion of in-house toilets, handwash basins in the reception area, heat thermometers upon entr y at reception, a reception waiter, cost may also be added to the labour cost so that protocols, queuing and general safety standards are managed. Internal spaces in restaurants, bars, cafés food stores, food courts etc will need to be re-balanced, resulting in less seating, therefore less sales. There is also the overall cost of new measures, including the Code determined physical and operational remodelling of common seating zones and public spaces so that they can be prepared for safe-distancing, including food court and external dining zones. COPYRIGHT©

Getting back to health: a financial overview

rior to the 'lockdown', F&B outlets on average had net profit before taxes/etc. of 9.8%. The vast majority of costs were variable. (Variable costs include cost of goods sold and labour while fixed costs are made up of rent, utilities, phone, internet, insurance, security etc. Variable costs can be adjusted but, by their nature, fixed costs can’t.) In the Next-Normal, it looks likely that the number of seats in any venue may be reduced by half, certainly for the short-term. With a commensurate decline in customers, the average F&B outlet would lose money. The graph below shows a static situation: 50% of capacity = 50% of customers. Future Food modelling shows that with a loss of 42% of customers that the average F&B outlet can turn a small profit. But small profit is not enough. This is where landlords can help. It is not about rent but rather, ensuring F&B Operators understand the bigger picture, such as new visible and obvious hygiene requirements of their operations (both front of house and back of house,) as well as assistance with marketing and steps to provide the smooth and safe operation of delivery services. This vital assistance can help reduce operator labour costs and increase revenue, so that F&B Operators can focus on their customers. However, as is shown in the graphic, this help from the landlords can only go so far. In order to reduce variable costs more, F&B operators will need to enhance the productivity of their workers. Innovations such as contactless ordering and payment through the use of apps means that the outlets can streamline their operations into hygienically-safe, best-practice standards, increase throughput of customers and maintain staff. It will be through the combination of all of these that the industry will not just survive, but thrive.

Post COVID-19 analysis of cost & profits

SHOPPING CENTRE NEWS 33

To date many landlords have provided new systems to support retail sales (ie. Westfield Direct) but much more creativity will be required so that seated guests feel welcome safe, and sales potentials are maximised. Landlords need to be flexible and support proposed retailer changes to permitted use clauses to enable eat in, take away, delivery, grocery lines, seating areas etc. Bars come with an entirely different set of challenges and these too need to be worked through with landlords. This may provide inherent determination of business models and business case remodelling. Outcomes of this may well include reduced service standards as we traditionally think of them. Personal service and connection with customers is likely to be less prominent as we shift our service values to incorporate speed of service, 'no-wait' collection of pre-orders and express grab and go facilities.

Landlords must adopt strategic leadership roles So, who is going to pay for all of this change? Well the short answer is all of us, and the property industry must retain and protect its rent roll, maximise its yield and minimise vacant tenancies, in order to retain profitability and asset value in the face of these new challenges. We must consider a long-term approach to ensure that we are making better decisions, and more strategic decisions that reflect not only a changing consumer sentiment but allow us to continue to be the first choice to spend time and money in by making our centres a destination of choice for our customers and communities. Landlord and property management companies will be required to seriously consider the huge disruption to food and hospitality tenancies and how they need to think differently in order to plan for change. They will need to be proactive and lead the way in rethinking the new standard in a post-COVID-19 era. Solutions need to be found and landlords need to reskill themselves to provide a new level of retailer guidance. This guidance needs to include clauses for food and beverage leases, physical space remodelling, control of the key aspects of the food related projects including common areas, seating zones (such as food courts), public toilets, water fountains, cleaning contactors, cleaning processes and strength of detergents, playgrounds, back of house processes, local council food controls and relationships with F&B businesses, in order to ensure that customers are 34 SCN

made to feel 100% safe. Sales must be secured.

Rent is the outcome of sales, it’s as simple as that. Landlords like never before must ensure sales are maximised so that rental income is maintained. Sales are the one and only saviour of food tenancies, business plans must focus on a variety of revenue streams such as in-restaurant grocery sections, service windows, seating areas, pick-up point for delivery-drivers; all possible avenues of sale opportunities need to be explored. The time is now. It is crucial that landlords and food operators work out what each group needs to do to ensure that food and hospitality precincts remain safe and appeal to customers once bans are lifted and spending begins. It’s now time for landlords and their food tenants to discuss the inevitable – where to from here? There needs to be increased communication and support to ensure food operators know where they stand and what their responsibilities are. Landlords and property managers will need to consider how practical and compliance controls are incorporated into lease terms with regards to postCOVID-19 code or local council food and safety standards.

Landlords will also need to be creative and work closely with food service professionals and consultancies to ensure the planning of future food zones and operating areas are designed with the flexibility to address current and future code and safety considerations. There is always the possibility of future viruses and pandemics. Landlords need to create a 'task force' of skilled professionals from a range of disciplines that completely review and re-model the business case, design considerations, legal requirements and operational parameters and standards for all future food and hospitality precincts. Hotel companies in Hong Kong have started this, guests checking into hotels now experience a completely different process. It starts with a personal temperature reading at check-in and ends with each room's carpets being cleaned upon check-out. Landlords and property managers must commit to the development of physical and operational processes to ensure that every precinct, food hall, high street or mixed-use development is presented as visually hygienic and well-managed to promote safe eating and dining environments. It is time for a new era in landlord – retailer relations. It must start now, and it must be strategically planned, implemented and evaluated so as to ensure there are no weak links in the recover y and sales maximisation process. What we do in the short term will be manifested in the long-term gains. SCN

FOOD FOCUS

F&B in the ‘new normal’

SUZEE BRAIN Director Brain & Poulter

acked in like sardines at the latest hip café, share platters of food lining the group table to celebrate your best friend’s birthday, handing over your keep cup to your favourite barista for your ritual morning coffee, paying cash for your takeaway dinner. These were all our 'normal' F&B behaviours that have evaporated overnight with the spread of COVID-19. Since early March 2020, we have been bombarded with queries as to what F&B precincts in our shopping centres, office complexes, universities, airports and tourism precincts will look like when we emerge into our 'new normal' once the pandemic is over. In this article we will cover off B&P’s expectations around; 1. Timing – the stages and likely times of re-opening the food service market to arrive at the 'new normal'. 2. Tenancies – who will survive and be able to re-open, which precincts will be most affected by shutdowns and which precincts may actually grow in F&B numbers? 3. Trends – What changes in customer purchasing behaviours and expectations adopted during the pandemic will remain post COVID-19?

Timing – The 'new normal' won’t start until Q2 2021 First and foremost, COVID-19 is a health threat that is resulting in an economic downturn. During the GFC, customers reduced spending on dining out significantly because they couldn’t afford it but they weren’t afraid to go out 36 SCN

to dine. This time is different. Until there is a widely available COVID-19 vaccine, the 'fear' of catching the deadly virus from social interaction will keep all but the 'bullet proof' Gen Z/Millennials away from large places of social gathering such as cafés, restaurants, food courts, food halls and entertainment venues. So between now and the new normal, B&P is planning to support our clients to

for the demand. In order to pay the rent, wages and food costs, tenancies will need to turnover at least 70% of what they were taking pre COVID-19. Not all will be able to do this and there will be further closures, vacancies and reduced lease renewals. Our 'semi-normal F&B preparation package' is ready to be deployed by pro-active landlords to ensure re-opening tenants have developed hygiene protocols, physical and digital communications, social distancing measures, booking management systems as well as implementing takeaway and delivery platforms to maximise every sales opportunity. So far, less than a third of Australian food service operators are prepared for the semi-normal. Table 1 (top right) is our estimate of the staging to get to the new normal.

"Tenancies – 25% of all F&B could close permanently"

prepare for the 'semi-normal' – where reduced social distancing measures see dining-in resume but with enforceable social distancing measures and heightened customer expectations around sanitation. Customers cautiously and in small group sizes will venture back into restaurants to celebrate events or to relieve cabin fever, business meetings over a coffee may resume in smaller numbers, a reduced or alternating week workforce returns and requires takeaway lunches and morning caffeine fixes. Non-essential shopping is permitted, creating some impulse F&B sales opportunities, school and school sport resumes creating increased takeaway and casual dining chances. During the 'semi-normal' period, a time when it is likely we could see mass unemployment and reduced income for over half of the AU/NZ workforce and many enterprises going under, there will be too many food service outlets open

Whoa – that’s a headline that’s hard to write but the evidence is mounting that it’s a likely outcome. Figures from Business NSW indicated food service sales were down 15% in March and 30% of food service businesses closed, current estimates from the Restaurant & Caterering Association NSW is that sales in April will be down 25-35% and by the time you're reading this we could be starting to see the start of the bankruptcies and closures. So why wouldn’t we just see a V-shape recovery in food service spending to return us to pre COVID-19 spending levels? Here’s a few significant reasons; • Two million unemployed and six million workers on JobKeeper means about two-thirds of the workforce have reduced earnings. Eating out is always one of the first non-essential categories to tighten when times get tough. • Health fears – until there is a vaccine widely available, the majority of consumers will remain cautious of close social contact and will opt for cooking at home and takeaway, both of which have

Table 1 Stage ~Timeline

Phase

Restrictions

Impacts

One Q2 2020 Business as • Takeaway (T/A) only unusual

• • • •

Two Q3/Q4 2020 Business as – Q1 2021 semi-normal

• Too many stores for customers so turnovers stunted • Not enough seats to support sales needed • Some stores start to go broke/enter VA

• Dine In permitted with 4m2 pp spacing • 100 person limit on indoor dining spaces • Group bookings/functions limited to 10 pax • Interstate travel permitted

Store closures Difficulties pivoting to T/A only Radical decline in MAT impacting rent Desire to keep stores open & trading

Three Q2 2021 Business as • All venues allowed to trade (vaccine new normal • Group limits removed available) • Cinemas and indoor entertainment/sport re-open • International borders re-open

• Habits formed during stage 1 & 2 such as WFH, live-streaming events, on line socialising and delivery reduce CBD & in centre footfall • Mass unemployment limits discretionary spending • % of online sales grows but tenants can’t carry third party delivery fees at 30% and occ cost at 20% – dark kitchens become option and lease renewals shrink • Store numbers re-balance from CBD to neighbourhoods

and profitable than others in order to prepare an F&B strategy, lease plan and abatement program to trade your centre, precinct or store out of trouble. a lower cost and offer a safer experience. • Social spacing in a restaurant is costly – reducing the number of customers that can be served, even placing limits on total numbers of customers allowed within enclosed spaces means it will not be economical for operators – especially large format operators to open. • The BIG spenders are missing – tourists and the big end of town corporates are no longer around. Border restrictions, work from home mandates and limitations on group sizes for dining mean those that spend the largest amounts on average transactions have disappeared. At risk in particular is the CBD and waterfront tourist precincts. Now is a time for ver y strategic analysis of food service performance, trade area sensitivities to post COVID-19 affects and a real understanding of the mechanics of which food service cuisines and operators can be more productive

Trends – retained habits in the 'new normal' According to research from Euromonitor International, habits adopted during a crisis remain if the crisis extends for longer than one financial quarter. B&P has been studying and analysing consumer behaviour coming in from Asia, Europe and the US and over-laying an Australian food lens on the insights to pinpoint the habits that will remain and which will re-lapse through the stages of recovery. So far, we have reviewed 27 habits from full body spray sanitation machines at the entry to restaurants to loo paper being delivered with your takeaway pizza. What we’re clear on is that different habits will remain under the differing trading restrictions – some will stay and some will fade. If you’d like the full list contact our office but here are five habits to get you started. See Table 2 (below).

The upside B&P is more excited than ever at the chance for shopping centres to emerge from the COVID-19 crisis as the new omni-channel marketplace. Re-configuring food offers within centres to create harmonious spaces and offers where customers can interact in centre, online and remain connected as a community using live streaming, video and digital tools will be paramount in the new normal. With increased adoption of working from home, reduced working hours and online learning there is a potential 're-balancing' of food hot spots from the CBD to the neighbourhoods and villages and changing the purpose and role shopping centres play in our daily lives. We look forward to supporting you with smart strategies and innovative physical and digital concepts through these unprecedented times. SCN

Table 2 Habit

Business as unusual

Semi-normal

New normal

Yes Yes Yes Yes Diminishing as recession bites

Somewhat – food courts, share tables, bench seating Yes Yes Yes Diminishing as recession bites SHOPPING CENTRE NEWS 37

legal matters Robert Spiers can always find fault in ‘normal time’ legislation. When circumstances change and legislation is rushed to deal with emerging emergencies, Speirs can find loopholes and anomalies in plague proportions!

Coronalaw One message has been received from government loud and clear in response to the pandemic: landlords will have to take their disinfectant like a man. ROBERT SPEIRS Founding Partner Speirs Ryan

On 7 April 2020, the National Cabinet announced the Code. The Code is a statement of how the parties to qualifying leases are to conduct themselves for the life of the JobKeeper program and, in some respects, during “a reasonable recovery period”. The Code derives its force from the representation on the National Cabinet of all of the states and territories, and their collective will to enact local legislation to reflect the principles embodied in the Code. The legislative framework is moving rapidly, and by the time you read this article lawyers like me will be swimming in a swamp of state and territory regulation, all giving voice to the Code in slightly different keys. Lawyers like me are also trying to get a firm handle on how to apply the regulations. I know everyone is running at a million miles an hour, and everyone is doing their best, but the absence of conformity on the details means that national industry participants will have to carry a little more lead in the saddle-bags, while they try to apply the Code in seven different ways. At the time of writing (4 May 2020), a number of jurisdictions had enacted

38 SCN

enabling and/or substantive legislation and regulations. None have applied the Code in all respects, and all have gone off the reservation in slightly different directions. For example, the Code is expressed to commence in all states and territories from a date following 3 April 2020. In response, the WA and SA legislation commences on 30 March 2020. Queensland commences on a date to be fixed by regulation, but not earlier than 23 April 2020. And NSW commenced 24 April 2020. The NSW regulation runs for a fixed six months. WA and SA also run for a maximum six months, but the period can be shortened. Code Leasing Principle 2 requires lessees to remain committed to the terms of their leases, subject to the trading and other relief afforded by the Code. Material failure to comply with the lease (as modified) will forfeit any protections provided to the lessee under the Code. The state legislation to date has failed to pick this up. It is obviously an important point of balance for landlords, and an interesting piece of cherry-picking by the states. Industry participants are now required to apply the regulations. Let’s look at one simple question that is being asked: can a lessor terminate a lease during the prescribed period because of a pre-pandemic (and unremedied) failure to pay rent?

emergency period is suspended. So, no termination, whenever the failure to pay rent occurred. And this applies, whether or not the lessee is having a crack or has turned off the lights and taken a cruise on the Ruby Princess.

SCN magazine’s new digital flipbook is out now! To accommodate those who are working from home, this latest issue of SCN is also available as a digital magazine – simply head to our website to view this issue as a flipbook.

Available to premium members only: shoppingcentrenews.com.au

40 SCN

In NSW, s6 appears to arrive at the same destination as s9 in WA. The NSW regulation says: “…a lessor must not take any prescribed action against the lessee on the grounds of a breach of the commercial lease during the prescribed period consisting of (a) a failure to pay rent…” (emphasis added). This seems to say that if the breach in the payment of rent occurs during the prescribed period, the lessor cannot enforce. However, this leaves open the possibility that a lessor can enforce during the prescribed period, if the breach occurred before 24 April 2020. This resonates with s5, which says that the regulation applies to rights in relation to circumstances occurring during the prescribed period. A default in the payment of rent before the prescribed period is not a circumstance occurring “during” that period. This result is avoided if s6 is read as if it said “… a lessor must not during the prescribed period take any prescribed action…”. It is possible that s7 in NSW is an attempt to get over this problem. It says that a lessor must not take or continue prescribed action on the grounds of breach consisting of a failure to pay rent during the prescribed period, unless the lessor goes through a negotiation process (emphasis added). However, if this is the intention, the provision seems to suffer from the s6 problem referred to above. The words “during the prescribed period” still seem to be in the wrong spot. If my concern is correct, it appears to produce in NSW the anomalous result that a lessor can re-enter and terminate for non-payment of rent in the period of, say, late March to early April, when lessees were critically impacted by the crisis. On the other side of the coin, it also appears to produce the prospect that lessors will not be able to sue lessees for failure to pay rent during the pandemic period, even where the lessee breaches rent obligations that have been negotiated down in accordance with Code Principles 3 and 4. There may be more to this story, but

we will leave that for another day. Both jurisdictions enable dispute processes in consequence of the legislation. In WA, the lessee or lessor can apply to the SAT for relief, subject to failure of alternative dispute resolution. If the proceedings relate to a code of conduct dispute, any relief can be ordered, including as to the rent payable, and waiver and deferral. If the proceedings relate to financial hardship in consequence of the pandemic, the Tribunal is also empowered to terminate the lease. This last right is not mentioned in the Code, and in fact appears to be contrary to Code Principle 2.

In NSW, s10 of the regulation permits the lessor to take prescribed action on grounds not related to the economic impact of the pandemic. In addition, the Retail Leases Act 1994 dispute resolution machinery is grafted on to pandemic disputes. This means that if there is a dispute, the usual process of mediation, followed by NCAT proceedings will apply. In considering a decision, NCAT is directed to have regard to the Code principles in relation to proceedings for the recovery of possession from the lessee, termination of the lease by the lessor or the exercise by the lessor of any other right. It does not grant the lessee a right of termination. This appears to be a more measured response to the application of the Code principles than the approach taken in WA. Fortunately, my sense so far is that disputes will be the exception, rather than the rule, whatever the terms of the legislation. So far, we are seeing in practice, a lot of olive branch, and almost no baseball bat. If that trend continues, we will continue to see sensible commercial outcomes, which will have regard to the broad Code principles, rather than see parties trying to leverage advantage based on drafting. I am hopeful we will not need to spend too much time analysing the details. SCN

COMMENT

The International Council of Shopping Centres is anything but ‘International’. Over the years, the ICSC has ‘positioned’ itself as the ‘authoritative institution’ of the shopping centre world. But that’s purely a marketing strategy; the reality is diametrically opposed. Although some of the ICSC administrations have been sincere, hard-working and committed, the reality is that the US has never been a world leader in the shopping centre field, and less so, the ICSC. Its influence is waning; in fact, it’s already waned!

ICSC abandons its global role MILTON COCKBURN is a former member of the Executive Committee of the ICSC Asia Pacific Advisory Board

fter decades spent forging a global role, the International Council of Shopping Centers (ICSC), headquartered in New York, has now decided to confine its activities to the US and Canada. Until last year, outside North America, the ICSC was organised on three international regions: Europe-Middle East; Asia Pacific; and Latin AmericaCaribbean, with each region headed by a Managing Director. SCN revealed in 2016 (Volume 34, Number 5, 2016) that the ICSC had scaled back its activities and role in the Asia Pacific region, had closed its China office and had retrenched most of its staff, including the Managing Director, Sara Fang Horton.

The ICSC has now closed its Europe-Middle East office, which was its largest international office, and has retrenched its staff, including the Managing Director, Bill Kistler. This was reported by the European property magazine, PropertyEU, on 28 January 2020. The magazine said the decision had been taken in January 2019 but there has been no announcement by ICSC. 42 SCN

PropertyEU also reported: “It is understood that the ICSC also took a decision to shut its Asia and Latin America operations at the start of last year [2019]”. The ICSC website gives no information about the closure of the international offices, nor was there any mention of the closures in the ICSC’s Annual Report for 2018-2019. The ICSC has, however, deleted all references to its international offices on its website. SCN can confirm that the ICSC no longer has an office or any staff in Singapore, which after the closure of the China office in 2016 once again became the headquarters of ICSC’s Asia Pacific region. SCN can also confirm that the ICSC closed its Latin America office earlier this year and retrenched its Managing Director, Daniel Batlle. The last ICSC event in the region was RECon Latin America, which was held in Lima in November 2019. Again, there was no announcement by the ICSC of this closure. The scrapping of the international offices means that the ICSC now operates only as a North American organisation. This reverses the strategy of internationalising ICSC’s operations and membership, which began under its long-ser ving CEO, John Riordan, and which was accelerated under his successor, Mike Kercheval. There were always opponents of this globalisation strategy within ICSC. Those arguing for an 'America-first' strategy pointed to the costs of carrying these regions. In 2016, the ICSC apparently lost about US$2 million internationally, with the Asia Pacific region accounting for about US$600,000 of this loss. Despite this international loss, the ICSC still posted an operating surplus that year of US$2.34 million.

Those opposed to giving meaning to the word “international” in ICSC’s title appear to have gained an ally when Mike Kercheval was succeeded as CEO in September 2015 by Tom McGee, a former senior executive at Deloitte. One of McGee’s first actions was to substantially wind back the ICSC’s operations in Asia and to commission reviews of the other international regions. These reviews have apparently led to the decision to close all international offices. Although the closure of the international offices was finalised before the COVID-19 health and economic crises began, the decision will be seen to have been vindicated by the changed financial circumstances that the ICSC now faces. While the ICSC made an operating surplus of nearly US$1 million in 2018 (the latest accounts publicly available), this could be the last surplus it posts for some time. The ICSC’s major dealmaking convention, RECon, usually held each May in Las Vegas, has been 'suspended' and there must be doubt about whether it can be rescheduled in 2020. RECon usually contributes net revenues of about US$13 million to the ICSC’s budget. Many other revenue-generating activities of the ICSC have also been curtailed by the US lockdowns. The ICSC’s 'events' page on its website is usually packed with activities scheduled throughout the US and Canada. At the time of writing the only item on the page is a notice advising that RECon, which was to be held on 17-19 May 2020, is 'suspended'. The ICSC’s membership income is also likely to take a hit, given the severe downturn in the shopping centre

and retailing industries in the US and Canada as a result of the lockdown. The ICSC will also have to confront a depressed retailing environment, which is likely to prevail for some time even after the American economy is kickstarted. Nevertheless, the ICSC entered the economic downturn with a healthy balance sheet. At 31 December 2018 it had net assets (reser ves) of US$113 million, although it is not known how damaging the recent decline in the financial markets has been to ICSC’s investments. The organisation is likely to need to dig deep into its reser ves over the next few years if it is to avoid substantially reducing its activities and staffing levels in North America. The ICSC’s decision to close its Europe-Middle East office has left European shopping centre owners and retailers searching for a replacement body. According to PropertyEU, a new European organisation is being planned, tentatively called the European Council of Shopping Places (ECSP). The negotiations to begin a replacement trade association were being led by Peter Wilhelm, who was the European Chairman of ICSC before the axe fell

on that body. PropertyEU reported that, at its peak, the European region of ICSC had about 7,000 members across 35 countries. The ICSC decision is unlikely to have much impact in the Middle East where the Middle East Council of Shopping Centres & Retailers (MECSCR), based in Dubai, remains strong and now reaches into the North African region. The ICSC’s involvement in the Asian region is now likely to cease. Without staff, its role in areas such as shopping centre education will be impossible. The major convention, RECon Asia Pacific, held last year in Singapore, will not be held this year and its future is doubtful. A financially weakened ICSC is unlikely to contribute resources to stage this event in future years.

Other shopping centre peak councils in Asia, such as Mall China and the Council of Asian Shopping Centres, are likely to be the main beneficiaries of the ICSC’s decision to withdraw to North America. The ICSC’s reluctance to announce the closure of its international offices

suggests there is sensitivity within the organisation about the 'Americanisation' of ICSC. While some blame CEO Tom McGee for the new strategy, the decisions to close the international offices could not have been taken without the agreement of the ICSC’s Executive Board. In 2016, when the ICSC dramatically wound back its operations and staffing in Asia, the then ICSC Chair, Liz Holland, denied that there was pressure from within the Executive Board, and within the ICSC’s Board of Trustees, to retreat from its international operations. That has obviously changed. SCN submitted questions to the ICSC’s media office in New York seeking information about the closure of the international offices but there was no response at the time of publication. The ICSC still remains active in Canada so the word 'international' in its title is not yet a misnomer. Nevertheless, just as the rest of the world is amused by America’s insistence on calling its national baseball competition the 'World Series', the name International Council of Shopping Centers is likely to become something of a running joke outside North America. SCN

SHOPPING CENTRE NEWS 43

CDB GUNS 2020

GUNS

he usual 12 month reporting period for SCN's annual CBD Guns runs from 1 April to 31 March. This year, we changed it to 1 March 2019 to 29 February 2020. We did this as the COVID-19 situation led to a number of variances across the nation during the month of March 2020; some centres traded with all stores open; others partially closed with even some closed or not trading for most of the month. March was a month with the industry, especially the CBD component, ‘all over the place’ and all coming to

terms with it in different ways until some sort of uniformity was established. This year, the list is also shorter than last year's due to an almost unprecedented degree of redevelopment in CBDs. Sydney's MLC Centre and Harbourside, as well as Perth's City Central, Enex and Forrest Chase were development affected during the year. But that doesn’t mean the year was uneventful; it was. Prior to COVID-19 it was one of the most challenging retail periods in decades; bushfires had an enormous influence, as did the drought.

Those of us who live in major urban areas have wonder ful choice in where we shop; we can go local, to our nearest (or favourite regional) or we can go ‘down-town’ to the city. Those in regional areas shop locally for dayto-day items but the nearest ‘city’ is where they come for the rarer purchases. As a trip to the city is a major event, they make the most of it and their spending power is significant. In a year of drought and bushfires, this market was significantly down. In a challenging year, the results

GLA m2

MAT million

Gross Lettable Area at February 29, 2020

March 1, 2019 to February 29, 2020

GLA m2

Centre Name, State

1 QV Melbourne, VIC, Dexus Funds & Victoria Sq.QV/Dexus

48,233

Emporium Melbourne, VIC, VCX & GIC/Vicinity Centres

$413.43

2 Emporium Melbourne, VIC, VCX & GIC/Vicinity Centres

45,301

QueensPlaza, QLD, VCX/Vicinity Centres

$309.69

3 QueensPlaza, QLD, VCX/Vicinity Centres

39,378

QV Melbourne, VIC, Dexus Funds & Victoria Sq.QV/Dexus $298.90

4 Barangaroo, NSW, LLITST, LLOITST, LLMP/Lendlease

17,238

World Square, NSW, Arcadia & ISPT/JLL

5 World Square, NSW, Arcadia & ISPT/JLL

16,436

Queen Victoria Building, NSW, VCX & GIC/Vicinity Centres $274.30

6 The Galeries, NSW, VCX & GIC/Vicinity Centres

15,000

The Galeries, NSW, VCX & GIC/Vicinity Centres

$200.31

7 Queen Victoria Building, NSW, VCX & GIC/Vicinity Centres

13,908

Barangaroo, NSW, LLITST, LLOITST, LLMP/Lendlease

$192.57

8 St. Collins Lane, VIC, J.P. Morgan/JLL

9,359

The Strand Arcade, NSW, VCX & GIC/Vicinity Centres

$136.38

9 Greenwood Plaza, NSW, Mirvac & Nuveen/Mirvac

8,942

Metcentre, NSW, Mirvac & Blackstone/Mirvac

$84.87

10 Eagle Street Pier, QLD, Dexus Funds Mgt/Dexus

7,480

10 Greenwood Plaza, NSW, Mirvac & Nuveen/Mirvac

$83.51

11 Metcentre, NSW, Mirvac & Blackstone/Mirvac

6,496

11 Gateway, NSW, DWPF/Dexus

$79.44

12 Galleria Melbourne, VIC, DOTA/Dexus

6,222

12 Eagle Street Pier, QLD, Dexus Funds Mgt/Dexus

$50.75

13 The Strand Arcade, NSW, VCX & GIC/Vicinity Centres

5,961

13 St. Collins Lane, VIC, J.P. Morgan/JLL

$41.71

14 Gateway, NSW, DWPF/Dexus

5,700

14 Galleria Melbourne, VIC, DOTA/Dexus

$41.41

15 Chifley, NSW, Charter Hall & GIC/Charter Hall

4,833

15 The Strand Melbourne, VIC, ISPT/JLL

$32.60

16 Stockland Piccadilly, NSW, Stockland/Stockland

3,001

16 Stockland Piccadilly, NSW, Stockland/Stockland

$30.26

17 The Strand Melbourne, VIC, ISPT/JLL

2,396

17 Chifley, NSW, Charter Hall & GIC/Charter Hall

$28.25

Centre Name, State Owner/Mgmt

44 SCN

Owner/Mgmt

MAT million

$284.15

2020 were far better than many analysts predicted. Vicinity’s Emporium in Melbourne tops the MAT list with an 8% fall in sales over the previous year; their QueensPlaza in Brisbane is the runner up with a 7% increase! In third place, Dexus’ QV Melbourne showed a ver y creditable increase of some 4.5%. Although a tough year, some really good results – Dexus’ Galleria was up nearly 14% and Gateway Sydney was up 7%. Charter Hall’s Chifley, showed a 6% improvement with the JLL managed St. Collins Lane up by almost 12%.

Includes the trading area of all tenants located at the centre. MAT: Moving Annual Turnover ($ million) Includes GST. Excludes sales from casual tenants, financial institutions, health insurance, gaming venues, TAB/soft gambling. MAT/m2:

Vicinity’s Strand Arcade has the highest turnover per square metre of any centre, whatever size, in Australia. The multi-level centre in Sydney's CBD has a staggering MAT/m2 close to $30,000 and, even in a difficult year, showed an improvement on last year of some 2%. In Specialty MAT/m2, The Strand Arcade obviously took the honours. Although most of the shops are relatively small, it’s still an outstanding per formance. SCN

Total retail sales of the centre divided by the retail area from which the retail sales were derived. Excludes financial institutions, ATMs, TAB/soft gambling, cinemas and entertainment venues. Specialty MAT/m2: Total retail sales for trade reporting tenants with a GLA below 400m2, divided by the retail area from which the retail sales were derived. Travel agencies are excluded from Specialty MAT/m2.

MAT/m2

Specialty MAT/m2

March 1, 2019 to February 29, 2020

Centre Name, State

Owner/Mgmt

MAT/m2

Centre Name, State

Owner/Mgmt

Spec MAT/m2

The Strand Arcade, NSW, VCX & GIC/Vicinity Centres

$29,598

The Strand Arcade, NSW, VCX & GIC/Vicinity Centres

Queen Victoria Building, NSW, VCX & GIC/ Vicinity Centres $21,104

Queen Victoria Building, NSW, VCX & GIC/Vicinity Centres $23,686

World Square, NSW, Arcadia & ISPT/JLL

$18,635

QueensPlaza, QLD, VCX/Vicinity Centres

$23,296

Barangaroo, NSW, LLITST, LLOITST, LLMP/Lendlease

$15,505

The Galeries, NSW, VCX & GIC/Vicinity Centres

$20,921

Gateway, NSW, DWPF/Dexus

$14,090

Barangaroo, NSW, LLITST, LLOITST, LLMP/Lendlease

$19,453

Metcentre, NSW, Mirvac & Blackstone/Mirvac

$14,029

Gateway, NSW, DWPF/Dexus

$15,397

The Galeries, NSW, VCX & GIC/Vicinity Centres

$13,408

The Strand Melbourne, VIC, ISPT/JLL

$14,043

The Strand Melbourne, VIC, ISPT/JLL

$13,356

World Square, NSW, Arcadia & ISPT/JLL

$12,979

Galleria, Melbourne, VIC, DOTA/Dexus

$13,260

Emporium Melbourne, VIC, VCX & GIC/Vicinity Centres

$12,683

10 Stockland Piccadilly, NSW, Stockland/Stockland

$12,567

10 Metcentre, NSW, Mirvac & Blackstone/Mirvac Real Estate $12,063

11 Greenwood Plaza, NSW, Mirvac & Nuveen/Mirvac

$10,683

11 QV Melbourne, VIC, Dexus Funds & Victoria Sq.QV/Dexus $10,759

12 Emporium Melbourne, VIC, VCX & GIC/Vicinity Centres

$10,596

12 Greenwood Plaza, NSW, Mirvac & Nuveen/Mirvac

$10,508

13 Chifley, NSW, Charter Hall & GIC/Charter Hall

$10,417

13 Stockland Piccadilly, NSW, Stockland/Stockland

$10,073

14 Chifley, NSW, Charter Hall & GIC/Charter Hall

$10,055

14 Eagle Street Pier, QLD, Dexus Funds Mgt/Dexus

$9,520

$28,058

15 QV Melbourne, VIC, Dexus Funds & Victoria Sq.QV/Dexus $9,366

15 Galleria, Melbourne, VIC, DOTA/Dexus

$9,476

16 QueensPlaza, QLD, VCX/Vicinity Centres

$8,642

16 Eagle Street Pier, QLD Dexus Funds Mgt/Dexus

$9,450

17 St. Collins Lane, VIC, J.P. Morgan/JLL

$4,456

17 St. Collins Lane, VIC, J.P. Morgan/JLL

N/R

SHOPPING CENTRE NEWS 45

CDB GUNS 2020

GLA: Gross Lettable Area

CBD

2020

GUNS

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46 SHOPPING CENTRE NEWS