This article is from the Australian Property Journal archive
CONSTRUCTION activity in the retail property market has picked up in Q2 for the second consecutive quarter, according to Jones Lang LaSalle.
JLL’s research found just seven retail projects were completed adding 52,700 sqm, whilst 10 projects started during the same period totalling 97,400 sqm.
As a result, the total amount of retail space under construction has risen to 590,300 sqm but remains well below the peak 1.4 million sqm underway at the peak in mid-2008.
The most significant start was Westfield’s 30,000 sqm extension of its Belconnen regional shopping centre in Canberra. The project was previously put on hold.
JLL national retail analyst Leigh Warner said whilst there is no doubt that the development environment remains very challenging, particularly for smaller developers, there is clear evidence that the tide is turning.
“Aside from the gradual pick up in projects starts, there has also been increased activity further down the pipeline. Developers are dusting off extension and refurbishment plans put on hold during the GFC and there were several large projects that received development approval in the quarter,”
But he said investors and owners remain very much focused on adding value to existing centres rather than developing new centres.
JLL’s Q2/2010 figures also showed that retail vacancy has largely stabilised. By sub-sector, the average regional centre vacancy rate was unchanged at a very low 0.8%, while the average sub-regional centre vacancy rate was also stable at 2.7%. The average neighbourhood centre vacancy rate fell 0.2% over H1/2010 to 4.6%, but the average CBD centre vacancy rose 0.2% to 3.2% reflecting the impact of new supply in some markets.
Head of retail management Tony Doherty said the stabilisation of vacancy is reflective of tenant demand, which has been steadily recovering since early 2010. However, he added that the level of demand eased slightly in the second quarter reflecting slightly weaker consumer sentiment and the impact of a fall in the Australian dollar on some retailers’ margins.
“While some are feeling the pinch and winding back plans, there are still some retailers that are expanding rapidly. One very bright spot is demand from international retailers, many of whom are looking to increase their presence in Australia due to lower growth prospects in their home countries,” he added.
On the investment side, JLL research show retail yields also stabilised and transaction activity has picked up over recent months. In total, 47 assets totalling $2.05 billion have changed hands compared to $2.49 billion during the entire 2009.
Head of retail investments Simon Rooney said the recovery in transactions reflects much stronger sentiment and buyer depth at the larger end of the investment market.
“The re-capitalisation of A-REITs and the rebalancing of fund mangers’ portfolios have resulted in many local buyers returning to the market, with significant capital now looking for placement in counter cyclical and quality opportunities.
“Offshore investors have also remained interested in Australia due to its strong economic growth prospects, relative to other developed countries, combined with our highly transparent real estate markets,” Rooney said.
Australian Property Journal
