'We are in the town centre business, not the shopping business' says Scentre Group CEO

“Enhancing that town centre notion is what we do. We are in the town centre business, not the shopping business.”

Rusanow was talking on Monday at the AFR’s annual property summit – a meeting of key commercial real estate business leaders – and outlining his vision of a sector that was hardest hit by the pandemic, but is now on a strong upward trajectory. 

Customer sentiment is indeed recovering hugely in retail, said Tim Church, chair of investment banking, Morgan Stanley Australia, with retail growing at 4.9 per cent in the June quarter compared to the same three months last year.

“We have a very positive outlook,” Church said. “With interest rates coming down, inflation down and REIT trading at a premium, and having seen this year the three largest real estate transactions in Australia’s history, it’s looking very good for 2026 and beyond.”

Deborah Coakley, managing director of real estate at QIC, said there had only been a two per cent vacancy across a number of the major shopping malls. “And that’s after redevelopment and repositioning,” she said. “Retail has been on the nose, but it’s returning to favour.”

For Rusanow, it is all about taking advantage of new retail opportunities. With more people working from home, many of them take breaks at their local shopping centres, maybe attending a gym, doing some work over lunch at a cafe and wandering around the shops. 

As a result, he said people needed to be given a reason to go to the town centre, to enjoy their time there, to look forward to the experience while they were there, and not view it as a chore.

“If a visit becomes a chore, then people will spend less time in our centres,” Rusanow said. “They’ll be less likely to take time out of their day to go there, and so it’s our responsibility to provide them with a satisfying experience.”

As a result, all the operators of large shopping centres have been investing in renovating old 30, 40 and 50-year-old buildings and repositioning them with the best facilities, a variety of shops and plenty of entertaining extras and events. One staged a movie premiere in a shopping centre and invited 400 influencers, who attracted 74 million views with their posts.

Vicinity Centres chief executive and managing director Peter Huddle said the growth in retail was largely a result of population growth and the lack of space for new retail developments.

“Fifty per cent of our portfolio is premium centres and sales are well above what they were before COVID,” he said. “That’s a result of us activating our centres, having flagship stores, concentrating on the product and presenting to the market in a compelling way that appeals to customers.”

Many of these shopping centres – sorry, town centres – are in excellent locations close to infrastructure and amenities, and also offer the opportunity to be excellent sites for housing development. There’s little better for retail, of course, than having potential customers living close by.

Sydney’s Rouse Hill is an excellent example, being an integrated mixed development with both retail and residential.

Russell Proutt, the chief executive and managing director of GPT, which owns that shopping centre, says it’s not always easy, however.

“There can be problems around planning, delivery, construction, productivity and warranties in NSW,” he said. “And then, are the returns associated with it worthwhile?” 

One of the market leaders has consistently been grocery stores. Amanda Steele, group executive head of property at ISPT, says the fundamentals – the lack of supply and growth of demand – make convenience retail a perfect investment.

“It’s doing very well,” she said. “We’re definitely seeing an inflection in the market as interest rates decrease, even though we’ve had the lowest annual GDP growth rate since 1991.

“Thankfully, we’re seeing a great demand for suburban grocery stores and, with population growth and the cost of living, there’s a great rush to convenience retail.”

In the early days of e-commerce, there was the prediction that it would threaten, and defeat, bricks-and-mortar retail. “But our grocery retailers understand the value of both online and regular retail,” Steele said. “So they work well together.” 

E-commerce might have proved overwhelming in China, where delivery of goods is often within one day, but not in other countries, said George Agethen, La Caisse managing director real estate Asia-Pacific and Latin America. 

“Elsewhere in the world, people still like to go to the grocery store and see what they want to buy and connect with it,” he said.