Shopping centre magnate John Gandel is one of the 10 richest people in Australia but he has barely uttered a word in public for more than a decade. This week he finally broke his silence to declare his ‘top priority’ is not the threat of online retailing or the high dollar… actually it’s the carbon tax.
And because Gandel is worth $3 billion and owns a chunk of Charter Hall, Colonial First State Retail Trust, half the nation’s biggest shopping centre (Chadstone, Melbourne) and has links with the Sussan and Sportsgirl fashion stores, the retail and property sector will take him very seriously indeed.
Public attention surrounding the introduction of the carbon tax on July 1 has centred squarely on power producers and miners. On Monday NSW power generator Macquarie Generation – the largest carbon emitter in Australia – confirmed the worst fears of many when it wrote off $800 million from its asset valuations.
But it is property, specifically the nation’s air conditioned shopping centres, which are next in the firing line.
What’s more, unlike prime office buildings where prestige tenants will pay more to reside in 'green buildings’, Milton Cockburn, chief executive of the Shopping Centre Council of Australia told Business Spectator retail tenants simply won’t do so.
So very soon what’s going to happen in the Gandel empire and at many more centres is that carbon tax-driven electricity price rises are going to get passed on to tenants, which in turn will further squeeze margins.
Worse still, major tenants such as Woolworths or Safeway will escape the initial impact due to the special arrangements those key lessees enjoy. Rather it is ‘specialty retailers’ – the legion of fashion and food stores that make up the bulk of retail selection at shopping centres – which will be hit first.
Shopping centre landlords like Gandel already know the carbon tax is creating winners and losers in related areas of commercial property. A report from the Australian Property Institute earlier this year found that in the city of Canberra office buildings with a top green rating had a 21 per cent premium to the market while those with low ratings had a 13 per cent discount. These are big variables in a low growth market. In the shopping centre sector the changes are coming so fast the analysts have yet to do the numbers.
Gandel rival Westfield has made some effort to get on the front foot – the new Westfield centre in Sydney CBD has achieved a six star green rating... one of the first Australian shopping centres to do so. But more typically, Westfield is going to pass its carbon tax costs down the line: last month the group said it would impose a "carbon emission related charge on lessees at cost" – the charge apples to 12,000 retail outlets across Australia.
Ultimately, it is inevitable that the higher carbon-related costs will hit not just tenancy expenses but the actual asset valuations of shopping centres and that will hit John Gandel’s bottom line… no wonder the man recently described as "reclusive" felt it was time to say something.