This article is from the Australian Property Journal archive
RETAIL remained the most traded commercial asset class in the first quarter of 2024, after a strong performance for the sector in 2023.
According to new research from Colliers, $916 million in retail assets traded in Q1 2024, outpacing other commercial property sectors by at least $189 million.
While demand for retail is expected to come from diverse capital sources over the second half of the year, the first quarter was driven by fund/syndicate investor demand, which made up 36% of the total traded.
“Enhanced appetite from institutional investors and Super Funds will see greater liquidity flow back into the retail sector in 2024, galvanised by the stabilisation of interest rates in addition to gradual and sustainable retail rental growth, enabled by the adjustment of rents during the COVID-19 period,” said Lachlan MacGillivray, managing director of retail capital markets at Colliers.
A recent report from JLL found fundamentals were improving across the retail asset class, drawing more capital to the retail sector, particularly from maiden buyers and institutional buyers.
With a recent report from Deloitte Access Economics declaring Australia’s retail recession is finally over, with the combined stage 3 tax cuts and forecast lower interest rates also expected stimulate consumer spending.
Over the quarter, shopping centres saw a 1.2% increase in average retail gross face rents nationally, supported by average total occupancy levels of 98.8%.
Super, major and regional centres continued to draw in customers and achieved rental growth of 4.5% since July 2021. While occupancy costs dropped from 19.3% pre-pandemic to 14.9% in Q1 2024.
“After Super, Major and Regional centres reported a +5.8% annual increase in total consumer sales last year, rental growth continued nationally over Q1 2024, with this asset class in Sydney even boasting +0.6% growth since the previous quarter,” added MacGillivray.
“The performance of Neighbourhood centres is also captivating investors, as high occupancy levels and resilient consumer spending for non-discretionary retail and supermarkets saw average gross face rents grow by +0.4% over Q1 2024, contributing to an overall growth rate of 4.3% since June 2021.”
Neighbourhood centres made up 37% of all transactions for the retail asset class in 2023 with Q1 2024 now seeing a total of $277 million transacted, way up on the $94.5 million transacted in the same period last year.
Last month, two Victorian neighbourhood shopping centres traded to private investors with Wyndham Vale Square and Drouin Central selling for a combined value in excess of $45 million.
While in January, a recently constructed Coles-developed Huntlee Shopping Centre in NSW Hunter Region was sold for $33 million to a Sydney based private investor.
“The groundswell of investor appetite for retail assets will continue to grow, despite sales data from February revealing that consumer spending only increased by +0.3% compared to this time last year,” said Nik Potter, director at Colliers.
“While it is anticipated that retailers may encounter subdued trading conditions over the next three to six months, due to ongoing cost of living pressures, impending Stage Three Tax Cuts in July and potential rate cuts later in the year will set the stage for enhanced retail spending momentum.”
