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Changing trends in food court rents vs. outdoor dining precincts in Australian shopping centres

October 2, 2024

The retail landscape in Australia has seen significant shifts, particularly in the utilising food and dining spaces within shopping centres. Traditional indoor food courts now face competition from vibrant outdoor dining precincts, often within the same centre, resulting in notable changes in rental trends and consumer preferences. Let’s deep dive into the evolving trends in food court rents versus outdoor dining precincts in Australian shopping centres.

Trends in food court rents

  1. Decline in average rents: In 2019, the average rent for food court leases in New South Wales and Queensland shopping centres was just under $5,000/m², with an average shop size of 24m². However, by 2023, the average passing rent had dropped nearly 10% to $4,500/m², maintaining the same average size of 24m². This decline reflects the growing competition from outdoor dining precincts and the changing consumer preferences towards more experiential dining options and health and safety considerations post-pandemic and design trends, a global phenomenon.
  2. High-value food courts in Sydney: Despite the decline, certain food courts in Sydney command significantly higher rents due to their prime locations and high foot traffic. Here are Sydney’s most expensive food courts, each with at least five shops, a floor area of 10-50m2, and food-related retailing. All rents below pass the net face rents:
  1. QVB: $9,580/m² for an average of 32m² space.
  2. Westfield Sydney: $7,848/m² net face for a 32m² space.
  3. Westfield Bondi: $6,390/m² for a 36m² space.
  4. Castle Towers: $6,150/m² for a 27m² space.
  5. Macquarie Centre: Average $6,155/m² net face for a 30m² space.
  6. The Galleries Victoria: $5,831/m² for a 35m² space.
  7. 25 Martin Place: $5,428/m² for a 43m² space.
  8. Broadway: $5,258/m² for a 33m² space.
  9. World Square: $5,367/m² for a 33m² space.
  10. Westfield Miranda: $4,987/m².

    Rise of outdoor dining precincts

    1. Increasing rents: Outdoor dining precincts and non-food court rents have notably increased. In 2019, the average net face rent was $1,850/m². By 2023, this had risen to an average of $2,100/m², marking a 13% increase. This trend highlights the growing popularity and perceived value of outdoor dining areas, which offer consumers a more attractive and flexible dining experience.
    2. Consumer Preferences
    • Experiential dining: Consumers are increasingly seeking unique and experiential dining experiences. Outdoor dining precincts provide a more relaxed and aesthetically pleasing environment compared to the often crowded and noisy indoor food courts.
    • Health and safety concerns: The COVID-19 pandemic has heightened awareness of health and safety, driving a preference for outdoor dining, offering better ventilation and a lower risk of virus transmission.
    • Decline of Food Court Customers: Due to the hybrid working-from-home arrangements for office workers, the foot traffic for lunch, which is the staple of the food court customer base, has decreased post-pandemic.

    Comparative analysis

    1.  Location and demographics:

    • CBD vs. suburban: In CBD centres with limited outdoor space, indoor food courts may still command higher rents due to convenience and high foot traffic. Conversely, suburban shopping centres with ample outdoor space can capitalise on creating attractive dining precincts, often located near entertainment precincts within the shopping centre. For example, at Westfield Tuggerah, food court rents are

    $3,000/m2 per annum net face, for an average of 44m2. Whereas the outdoor dining precinct, with an average size of 150m2 is approximately $1,500/m2 net face. Given that the outdoor dining precinct is triple the size of the food court, the rents/m2 for the outdoor area are comparatively strong.

    • Target demographics: Shopping centres catering to younger, trend-conscious demographics may benefit more from outdoor dining precincts, whereas those serving families or office workers might continue to see strong demand for indoor food courts.

    2.  Seasonal Variations:

    • Climate Impact: Australia’s diverse climate means that outdoor dining precincts may experience seasonal fluctuations in patronage. Shopping centres must balance this by providing weather-proof solutions like covered seating or heating for cooler months.

    The trends in food court rents versus outdoor dining precincts in Australian shopping centres reflect broader consumer preferences and market dynamics shifts. While outdoor dining precincts offer higher rent potential and align with modern consumer desires for unique dining experiences, indoor food courts remain relevant through modernisation and competitive pricing strategies.

    Shopping centre landlords must strategically balance these two offerings, leveraging the strengths of each to maximise occupancy and rental income. As the retail landscape evolves, staying attuned to consumer preferences and market trends will be crucial to success in the dynamic world of food and dining spaces.