Mega malls: Retail buyers splash $8.8bn in monster year
The value of retail property deals hit $8.8 billion last year — the second highest on record — as investors snapped up trophy assets and defended themselves against online commerce.
The mix of buyers shifted towards local investors as demand from offshore purchases fell from historically high levels.
And the first signs of yield decompression this cycle have emerged, according to JLL’s Australian Shopping Centre Investment Review and Outlook for 2018.
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“Given the compression in yields over the last few years and the increasing reliance on income growth as a driver of returns, asset selection will be key in 2018,” says JLL’s head of retail investments for Australasia, Simon Rooney.
“We expect high-quality retail assets to remain resilient, delivering attractive returns and therefore are continuing to be highly sought after by investors.”
The arrival of Amazon’s local operation could take about 0.5% a year from bricks-and-mortar retail turnover growth, JLL estimates, with landlords responding by adding more food outlets and refurbishing centres.
Last year saw the highest volume of transactions worth more than $300 million on record.
The largest trades included the $1.1 billion Vicinity Centres/GIC asset swap, the half stake in Indooroopilly Shopping Centre for about $800 million, the $680 million quarter stake in Melbourne’s Highpoint, the $436 million deal for Home Hub Castle Hill and Home Hub Marsden Park in Sydney, and a $305 million half stake in Rockingham Shopping Centre, in Western Australia.
The share of assets bought by offshore investors fell to 16% during the year, from more than a third in the prior year.
The report found softening in yields at the lower end of the range during the last quarter of the year — although at the upper end’s yields kept firming — as investors became more discriminating on price.
CBD retail, particularly in Sydney in Melbourne, is likely to perform more strongly this year, JLL says.
This article originally appeared on www.theaustralian.com.au/property.