Changing Consumer Behaviour – Embracing Essentials First in Neighbourhood Centres

If there’s one truth I’ve learned in retail property and asset management, it’s that consumer behaviour shapes everything. You can have the best tenancy mix, strong leases, and a well-presented centre, but if you’re not aligned with what the customer wants, you’ll be swimming against the tide.

The dominant trend in Australia at the moment is “essentials first.” Cost-of-living pressures, shifting value perceptions, and the rise of digital competition have reshaped the way Australians shop. For neighbourhood centres, this change presents both risks and opportunities. Those who adapt quickly will solidify their role as indispensable community hubs; those who don’t risk being left behind.

What’s Driving the Essentials-First Mindset

This shift hasn’t happened overnight. Several forces are converging to push consumers toward value and necessity:

• Cost-of-Living Crunch: Rising food bills, rents, and soaring energy costs have stretched household budgets to breaking point. Shoppers are cutting back on discretionary categories and prioritising everyday essentials.

• Value Shifts: Discount grocers such as Aldi and Costco continue to grow market share, while chemists and discount variety stores are seeing steady trade. Consumers are “trading down” - choosing cheaper alternatives or delaying non-essential purchases.

• Convenience Matters: With working from home now entrenched, people are shopping closer to home. Neighbourhood centres benefit from this, but customers expect quick, frictionless trips.

• Digital Competition: Online players like Shein, Temu, and Amazon are soaking up discretionary spend. Products such as clothing, homewares, and even pantry staples are increasingly purchased online. And it’s not just the younger consumers. A recent report into customer spending by Australia Post highlighted that older Australians increased online spending by 23% YOY as they become more comfortable with it.

This environment favours centres that lean into their strength: essential, convenient, and community-based retail.

Risks for Neighbourhood Centres

The essentials-first trend, while beneficial for anchor tenants, carries risks for landlords if ignored:

• Vacant Discretionary Stores: Specialty fashion, giftware, and boutique homewares are struggling. These closures reduce centre vibrancy.

• Diminished Atmosphere: A purely functional centre that offers only groceries and pharmacy risks feeling sterile, undermining customer engagement.

• Anchor Dependence: Over-reliance on supermarkets or chemists creates exposure - if they underperform or push back on lease terms, the centre’s entire income profile is at risk.

  
  

Steps Landlords Can Take

Neighbourhood centres can thrive in this new environment, but it requires proactive management and willingness to adjust strategy.

1. Rebalance the Tenant Mix

• Prioritise daily needs tenants such as grocers, bakers, butchers, and medical services.

• Strengthen the health and wellness offer with pharmacies, dentists, physios, and optometrists.

• Retain a limited number of lifestyle or discretionary operators - cafés, nail salons, barbers - that add vibrancy and dwell time.

• Target value-driven retailers (discount variety, budget fashion, takeaway food) that align with cautious consumer behaviour.

  
  

2. Support Convenience & Logistics

• Install click-and-collect bays and lockers to integrate online and offline shopping. We just did a deal with Australia Post for a parcel locker installation at one of our centres.

• Design car parks with short-stay, easy-access options for quick-trip customers. At another of our centres, we signed a deal for electric car charging stations. This gives an added reason to visit and improves the dwell time of the customer, while improving the centre’s green credentials.

• Encourage tenants to adopt apps, pre-order tools, and loyalty systems that make transactions faster and more predictable. These are cheaper and more accessible than they once were.

  
  

3. Enhance Community Relevance

• Activate common spaces with events, markets, and seasonal pop-ups to keep the centre lively.

• Run local marketing campaigns that tell tenant stories and reinforce the “shop local” message.

• Partner with schools, clubs, and health groups to strengthen community ties and foot traffic.

  
  

4. Protect Centre Vibrancy

• Avoid reducing the mix to nothing but essentials; balance utility with character.

• Focus on experience-based tenants - cafés, gyms, beauty, allied health - that cannot be replicated online.

• Curate a tenant mix that encourages dwell time and repeat visits, not just transactional stops.

  
  

Looking Ahead

The essentials-first mindset is not a temporary response to inflation - it reflects a deeper shift in consumer expectations. Australians are becoming more selective, digitally empowered, and less tolerant of inconvenience.

Neighbourhood centres are uniquely placed to benefit from this shift. They offer what customers want most: proximity, convenience, and trust. But to capture this opportunity, landlords must curate the right tenant mix, invest in convenience infrastructure, and nurture the community feel that differentiates them from online competitors.

Conclusion

The essentials-first trend is not a threat to neighbourhood centres; it is their greatest opportunity. By doubling down on daily needs, enhancing convenience, and sustaining vibrancy, these assets can position themselves as the cornerstone of local communities.

For landlords and investors, the message is clear: adapting to essentials-first behaviour is not optional, it is fundamental to protecting cash flow, sustaining foot traffic, and securing long-term asset value.

About the Author Alan Baynash brings 30 years of experience in the retail property sector, having worked with private investors, institutional landlords, and leading agencies. As Principal of TPD Asset Management, he specialises in helping high-net-worth individuals, family offices, and syndicates maximise returns and protect the long-term value of their retail property portfolios.