Retail landscape set for revamp
The Victorian government is set to revise nine existing residential and business zones and replace them with five broad zones after a ministerial advisory committee submitted findings in February.
The changes are likely to benefit bulky goods retailers and supermarkets most, according to the institute's Retail Property Update.
Business 3 and 4 zones will be collapsed into the business 2 zone, under the new laws.
"The area on which bulky goods development is of right within metropolitan Melbourne will effectively increase six-fold, from 355 hectares at present to 2206 hectares," the institute says.
That will boost retailers such as Aldi, Costco and Masters but is also likely to have a negative impact on land values.
"By significantly broadening retail development options and diminishing the scarcity value of existing retail land, the proposed changes can be expected to result in a recalibration of land values," it said.
The removal of the floor-space cap at principal activities centres will help large shopping centres such as Chadstone expand even further, it suggests.
It will potentially allow a transformation of existing bulky goods centres into US-style mega centres that incorporate large format fashion, footwear and accessory retailers.
The changes are also likely to encourage development of small-format supermarkets with a floor area less than 2000 square metres. They will become as of right participants in industrial 3 zoned land.
Victoria's specialised food retailers (butchers, bakers, delicatessens and greengrocers) as well as furniture, floor and homewares stores have borne the brunt of the post-GFC contraction in consumer spending, the institute said.
"Vacancy to date [has been] largely focused in retail strips and smaller neighbourhood centres, while regional centres maintain near full occupancy," the update said.
A recent pick-up in consumer confidence suggested a spending recovery in the months ahead but households were still focused on reducing debt. That was "likely to temper spending growth and maintain consumer focus on extracting value for money," it said.
Frequently Asked Questions about this Article…
The Victorian government is set to replace nine residential and business zones with five broader zones based on a ministerial advisory committee report. The proposed changes would broaden development options for retail and business land, potentially reshaping where and how retail — especially bulky goods and supermarkets — can develop across metropolitan Melbourne.
According to the Australian Property Institute's Retail Property Update, bulky goods retailers and supermarkets are likely to benefit most. The institute specifically mentions retailers such as Aldi, Costco and Masters as likely beneficiaries of expanded development rights.
The institute says the area where bulky goods development is allowed 'as of right' within metropolitan Melbourne would increase about six-fold — from 355 hectares currently to roughly 2,206 hectares — expanding where big-format retailers can locate.
Yes. The institute warns that by broadening retail development options and reducing the scarcity of existing retail land, the changes could recalibrate (potentially lower) land values. Everyday investors in retail property should watch this because land scarcity often underpins value and returns.
Removing the floor-space cap would allow large shopping centres such as Chadstone to expand further. The update suggests this could enable transformations of bulky goods centres into US-style mega centres that include large-format fashion, footwear and accessory retailers.
The proposed rules would encourage development of small-format supermarkets (under 2,000 square metres) by making them 'as of right' participants on Industrial 3 zoned land, which should make it easier for smaller grocers to open in more industrial locations.
The update notes vacancy has mainly been concentrated in retail strips and smaller neighbourhood centres, while regional centres maintain near full occupancy. It also says a recent pick-up in consumer confidence hints at a spending recovery, but households remain focused on reducing debt — likely tempering spending growth and keeping consumers value-conscious.
Investors should monitor final government decisions on zoning changes, shifts in retail land supply and land values, expansion plans from large centres and big retailers (like Aldi, Costco and Masters), vacancy trends in neighbourhood versus regional centres, and consumer spending indicators that affect retail demand.
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