- Investment activity in retail on the rise, CBRE report reveals
- Investors are taking a longer-term view, CBRE argues
- Large format on the rise in Sydney and Melbourne
Despite ongoing lockdowns, there is positive news for the retail sector with investment activity rising, including for large format retail (LFR) rents in Sydney and Melbourne, according to CBRE’s latest Retail MarketView Report.
It appears opportunistic investors are taking a longer-term view by adding retail assets to their shopping lists.
The total value of retail transactions jumped 82% to $2 billion between the first two quarters of 2021, with the year-on-year increase at 187%, which had been impacted by significant restrictions last year.
The report in particular singled out the sub-regional sector which saw almost $1.3 billion in assets traded in the second quarter of this year – double what was transacted during the same period last year and 16% the same period in 2019.
“We expect to see overall retail transaction volumes increase further in the second half of 2021, as foreign and domestic investors increasingly return to the market, attracted by high quality opportunities becoming available and the compelling returns, as investors continue to be priced out of alternative commercial property assets classes,” said CBRE’s Head of Retail Investments, Pacific, Simon Rooney.
“The retail mixed use space has become, and will continue to be, a key and strategic investor focus, as major opportunities present themselves and investors look to deliver enhanced returns via progressive asset repositioning and by leveraging off existing cashflow, with the inclusion of ancillary uses such as residential, medical centres and coworking spaces.”
Simon Rooney, CBRE
The report also showed that yields compressed in every retail asset class, except for regional centres. The strongest yield compression came from neighbourhood centres and subregional centres – both sectors benefit from strong supermarket sales.
In terms of LRF, this part of the market grew significantly, particularly in Sydney (23% year-on-year) and in Melbourne (5.5% year-on-year).
“We see improvement Australia-wide for large format retail rents that can be attributed to the growing housing market and the uptake of the Home Builder grant scheme,” said Shane Cook, CBRE’s head of large format retail.
“While household goods sales growth has slowed in the first half of 2021 compared to the significant growth of 2020, spending has remained resilient overall in the LFR space.”