A tale of two halves.
Lack of supply has been the leading feature of the retail investment market over the last financial year. After reaching record levels in 2012/13, the overall level of activity decreased in 2013/14 predominantly due to the lack of stock being offered to the market.
Competition for quality retail assets is strong, particularly for core and core plus product, with the volume of capital seeking placement in the retail sector exceeding stock available. Retail investment activity remains strong both historically and when compared to other property sectors.
Colliers International recorded 126 major retail investment sales (>$10 million) with a total value of $6.108 billion over the 2013/2014 financial year. Trading activity over this time was very much a tale of two halves with strong volumes during the second half of 2013 compared with the first half of 2014. The latter period was characterised by minimal product on the market and a mismatch between demand and supply.
The 2013/14 Financial Year saw neighbourhood centres dominate trading activity by volume. Both the quantity and value of centres sold increased notably reflecting strong interest from REITs, offshore investors and private investors. Large format retail is another standout asset which is seeing increasing demand, and over this 2013/14 period the value of sales in this asset class doubled when compared to the previous year.
The past 12 months has shown clear improvements in the retail spending environment as consumers increased their spending activity. Record low interest rates have continued to fuel strong growth in house prices, which have strengthened household balance sheets, driving an increase in spending. A generally weaker Australian Dollar (AUD) over the year assisted in curtailing some of the spending leakages to offshore online shopping and outbound tourism.
These improving retail conditions, combined with a broad spectrum of investors, ranging from super funds to REITS, private investors and syndicates should continue to drive demand for quality retail assets.
We trust you find our third Retail Investment Review insightful. Please don’t hesitate to contact one of our experts to discuss your retail investment needs or broader property requirements.