Economic Conditions

On a national level, retail turnover has grown modestly over the

past 12 months as higher interest rates, petrol and food prices

have lead to consumers curbing their spending patterns. While

the Australian economy continues to recover, consumers remain

cautious despite solid wage growth and a tight labour market.

Retail sales data for February show that while Australian retail

sales increased by 0.5%, surprisingly most of the increase

spending resulted from a rise in household good sales. Although

non-food retailing rose by 0.9%, this increase failed to

compensate for January’s 1.1% contraction. Most retail sales

categories recorded modest growth with only department stores

declining marginally over the month. Over the past 12 months,

food retail sales increased by 5.8% compared with non-food

retail sales which increased by only 2.1%.

Victoria remains one of Australia’s best performing states in

regards to retail turnover buoyed by solid population growth

which has led to significant housing construction. Over the year

to February 2011, total Victorian retail turnover grew by 2.8%

but like other parts of the country consumers decreased their

discretionary spending. Spending on electrical goods and

takeaway food contracted and other discretionary retailing

categories such as clothing and department store spending

witnessed only modest growth over the year. In contrast

consumers sought “cheap” luxury goods with increased turnover

recorded in cosmetics and book sales.

Consumer confidence remains optimistic, rising 1.2% up to

105.3% in April. Although consumer confidence continued its

rise in April, the index still remains below its rate in December

2010 having fallen earlier this year as a consequence of a string

of natural disasters. Consumers continue to show restraint with

the majority more focused on savings with spending levels

modest.

Victoria’s economic growth is forecast to continue to outstrip

Australian gains in the short term with real gross state product

growth (GSP) forecast to rise to 2.8% in 2011.

Tenancy Mix

The Geelong CBD Core comprises 791 shops and totals

172,587m2

of retail floor space of which 41% resides in the

shopping centres of Market Square and Westfield Geelong; with

street frontage retail space accounting for 58% and arcade

retailing accounting for the remaining 1%.

Overall, department store retail space totals more than

34,700m2 and accounts for approximately 20% of Geelong’s CBD

retail market. In comparison to the Melbourne CBD, the Geelong

CBD has a higher exposure to department stores which is likely

due to a lack of Sub-Regional shopping centres in the Geelong

region providing this offering. Clothing, food retailing, footwear

& soft goods exceed all other retail categories and accounts for a

further 26% of retail space in the CBD. Unsurprisingly, within the shopping centres of the CBD,

department stores and clothing tenants dominate the tenant

mix accounting for more than 66% by GLAR (gross lettable area

retail).

In contrast, food and hospitality (hotels and bars) account for

around 23% of all street frontage retail space in the Geelong

CBD.

Within the CBD several precincts have evolved over time with

food retailers making up 18% of all Ryrie Street tenancies, particularly around Yarra Street and the cinema area. Whereas

around the western end of Ryrie Street, an agglomeration of

serviced based occupants (such as real estate agencies) is

beginning to emerge, particularly around the intersection of

Gheringhap Street.

Geelong CBD Retail Study April 2011

80

100

120

140

160

180

Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11

Index

Retail Turnover by Industry Performance2004-2011

Food Clothing & Footwear

Dept. Stores Cafes & Restaurants

Source: Australian Bureau of Statistics and

Opteon Victoria

14%

23%

17%5%

8%

8%

8%

8%5% 4%

Geelong CBD Retail Tenancy MixFeburary 2011

Food Retailing

Dept. Stores

Clothing & Footwear

Household Goods

Recreational Goods

Personal Retailing

Hospitality

Services

Entertainment

Other

Source: Opteon Victoria

Vacancy

Total vacancy (by gross lettable area) for the CBD Core as at

February 2011 is 8.3% which has decreased from its peak of

11.7% in June 2009. This is despite the expansion of Westfield

Geelong, completed in April 2008 which added approximately

17,000 sq m or about 90 shops.

A number of streets in the CBD recorded a 0% vacancy rate

including: James Street and McLarty Place within the café and

arts precinct, whilst the new retailing/restaurant precinct along

Eastern Beach Road is fully occupied, interestingly at much

higher rents than achieved in the traditional CBD area.

Within the CBD Core, vacancies with street frontage stood at

13.3%, while vacancy within Geelong’s CBD shopping centres

was a very modest 1.8%. Vacancy within Geelong’s arcades

totalled 16.4%, but this statistic is susceptible to volatility given

the small amount of retail space within this category.

In terms of quality grades, more than 100,000m² of retail space

within the Geelong CBD Core is classed as prime with its vacancy

standing at 5.1%. In contrast, approximately 71,000m² of retail

space in the Geelong CBD is classed as secondary with its

vacancy totalling 13.0%.

Rents & Yields

Despite the credit crisis of 2008 and an increase in the floorspace

of 10% to the Geelong CBD Core, surprisingly statistical data

indicates that CBD retail rents have steadily increased since

2005.

In fact, Geelong CBD street frontage rents have increased by an

average 10% during 2010. As at April 2011, CBD street frontage

speciality shop rents range between $200/m2 and $300/m

2. By

comparison to other regional centres across Victoria and

Australia, Geelong’s retail strip retail levels are considered very

affordable, if not low.

The Geelong CBD market has very limited exposure to

institutional ownership and as such it was somewhat insulated

from the significant swings in value during and post the GFC

which occurred in metropolitan markets. Average market yields

have remained relatively steady over the past 12 months ranging

between 5-6.5% with private investors still dominating

purchases.

Outlook

Fundamentals supporting retail spending still exist. Real gross

state product (GSP) is forecast to rise by 2.8% in 2011, above the

2.7% growth achieved in the 2010 calendar year .

Furthermore, retail turnover for Victoria is expected to increase

by 4.2% in 2011, just above the 4.0% growth recorded in 2010.

In the short term, the vacancy rate for the Geelong CBD retail

market is expected to fall as more national tenants are likely to

be attracted to the Geelong market due to it’s “affordability”.

The recent opening of MacPac and Witchery in the CBD are

positive signs.

The recent chorus of debate regarding the apparent demise of

the CBD has demonstrated one thing - the people of Geelong are

passionate about their CBD. In the longer term, the future

direction of the Geelong CBD will to some extent be determined

through the preparation of “Vision II” .

Deakin University have made it public knowledge that they

would like to increase their student numbers in the city to

10,000 students and this would create a true “Univer-city” which

could be the impetus required to regenerate the city centre.

Main ContactsMain ContactsMain ContactsMain Contacts

Richard Jenkins– Research Manager richard.jenkins@opteonvictoria.com.au

Todd Devine– Director Commercial Services todd.devine@opteonvictoria.com.au

Office AddressOffice AddressOffice AddressOffice Address Level 1, 68-70 Gheringhap St, Geelong , VIC 3220

Ph: 1300 786 022

WebsiteWebsiteWebsiteWebsite www.opteonvictoria.com.au

EmailEmailEmailEmail valuers@opteonvictoria.com.au

DISCLAIMER- This report is published for general information only. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no legal

responsibility can be accepted by Opteon Victoria for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the view of Opteon Victoria

in relation to particular properties or projects. Reproduction of this report in whole or in part is not permitted without prior consent of, and proper reference to Opteon Victoria.

1.8%

13.0%

16.4%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

Shopping Centres Street Frontage Arcades

Vacant Shops

(GLAR)

Geelong CBD Vacancy RateFeburary 2011

Source: Opteon Victoria

Total Vacancy - 8.3%

Contact us for further information or to obtain the full report-