This article is from the Australian Property Journal archive
FOR the first time in almost 20 years, the retail market in 2023 topped transaction volumes of Australia’s traditional property sectors.
According to JLL Research, retail transaction volumes made up 36% of all sales in the traditional sectors, beating out industrial and retail for the first time since 2004. Despite this, the $6.25 billion in sales represented a 6% decline from the previous year.
While industrial transaction volumes fell by 30% and office volumes by 63%, representing 34% and 30% of the market share respectively.
“In a year of subdued transaction volumes in global capital markets, retail property in Australia has for the first time in 20 years been the most liquid sector with over AUD 6 billion transacted, demonstrating the returning capital demand,” said Nick Willis, senior director of retail investments at JLL, Australia and New Zealand.
“Whilst formal on-market offerings for retail assets were significantly constrained in 2023, the weight of capital drove a year dominated by off-market transactions led by buyer mandates.
“Globally, the performance of the retail sector is driving renewed interest, and whilst the majority of this capital is focused on higher return opportunities, core capital is re-engaging given the attraction of the robust underlying fundamentals of the asset class.”
In Q4 2023, retail sales represented nearly 60% of the total $5.52 billion in sales for the calendar year.
While $1.95 billion of regional and sub-regional transactions dominating the final three months.
“Managers have identified value in the Regional and Sub-Regional sub-sectors during 2023, notably Haben acquiring their first Regional classified shopping centre in Stockland Townsville for AUD 238.5 million,” added Willis.
“However, further to syndicate capital activity, the higher cost of debt has increased participation from ultra-high net worth investors who have a lower cost of capital, including the recent sale of Rosebud Plaza to a Sydney private for AUD 134.5 million.”
Local fund managers and syndicator capital dominated the retail buyer profile across all retail sub-sectors in 2023, accounting for more than 40% of total sales.
“The retail thematic is validated by the continued strength in tenant performance, limited floor space supply across all sub-sectors and heightened deal flow aiding underwriting,” said Sam Hatcher, head of retail investments at JLL, Australia and New Zealand.
“Further, funding for retail remains positive given the diversification of income providing stable interest cover ratios compared to other traditional asset classes which are often linked to one or two major tenant expires.”
