This article is from the Australian Property Journal archive
Buoyant consumer spending has seen resulted in positive quarter of retail trade growth in spite of the recent rise in interest rates, according to Jones Lang LaSalle.
According to JLL Research, figures for the June quarter showed continued tenant demand provided steady rental growth in all regional, subregional and neighbourhood markets. Net rental growth ranged from 0.8% to 1.5%, with the strongest growth recorded in the Perth regional centre market.
JLL’s retail research director David Snoswell said tenant demand has remained quite buoyant, which has in turn kept vacancy rates in enclosed shopping centres relatively low.
In this environment, he added landlords have continued to achieve rental growth, generally 1-2% above inflation.
According to JLL, for the year to June, rental growth in suburban centres was strongest in the resources driven Perth regional market, which saw an increase of 6.7%, and the lowest in the Adelaide neighbourhood market at 3.0%.
Low to moderate growth was reported in the bulky goods sector, with the exception being Perth, which has seen bulky goods rents escalate in line with the very strong housing market and economy.
Growth over the last 12 months has averaged nearly 30%, albeit off a low base, with net rents now averaging $188 sqm.
“Strong employment growth, low unemployment, solid wages growth and income tax cuts suggest that overall, consumer spending will remain buoyant.
“The RBA’s announcement in interest rates last week will be a challenge for low income families with large mortgages, as well as Sydney homeowners with very large mortgages. In terms of balancing the budget, some consumers may well try and reduce their transport costs to ensure enough money remains for retail spending,” Snoswell said.
“We have already seen evidence of this over the past year, with fuel sales and new large car sales declining as fuel prices have risen. However, many others have probably already fixed their interest rate payments to safeguard against the likelihood of future interest rate rises.
“The regional variations in the state economies is also likely to see some states feel the impact of the interest rate rise more than other states,” he added.
According to JLL, both WA and Queensland are booming on the back of the mining and resources sector, with strong economic growth and wages growth.
“We expect SA, NSW and Victoria will feel the brunt of the interest rate rise more so than the resource rich states. WA in particular has seen tremendous growth in house prices and should see retail trade continue to grow due to increased housing wealth.” Snoswell said.
JLL’s national advisory director John Burdekin said yields have continued to tighten across most major retail asset classes, with those markets firming by approximately 50 basis points in the past six months.
“The weight of funds looking for retail assets combined with the lack of stock available has seen a further re-rating of yields for enclosed shopping centres in the first six months of 2006.
“Indeed, the difficulty in accessing retail assets in Australia has been driving an increasing number of Australian investors to look offshore, particularly to the United States, where the property market has similarly high levels of transparency to Australia,” Burdekin concluded.
By Adam Parsons