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Retail investment booming despite tough market conditions

The future of Australia’s retail investment sector is strong despite mounting concerns over consumer sentiment, according to industry experts.

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Investment in retail property is at an all-time high despite growing concerns about the condition of the retail sector, industry experts say.

Savills Australia’s Ben Parkinson and Rick Silberman say that demand for retail-grade investment property was as strong as they had seen.

“Despite the consistent doom and gloom commentary regarding the retail landscape, much of the negative bias needs to be taken with a grain of salt,” Mr Silberman said.

“At the coalface, the demand for quality retail investment property is as strong as we can recall, as the fundamentals in most cases remain strong – land-rich assets and quality, reliable tenants with long, secure leases.”

Those casting doubt on the condition of the sector have failed to consider the full retail context and the varying demand for different assets, he says.

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“The retail investment market covers many subsets and is therefore much too broad to paint with the same brush.

“The demand for certain retail assets continues to be strong, which we do not see abating any time soon.”

Nondiscretionary assets like supermarkets are those which are in the highest demand in the current landscape, Mr Parkinson said, with many buyers interested in neighbourhood shopping centres, standalone supermarkets and single-tenanted retail assets.

“Quality retail investment assets offer a secure cash flow, high occupancy rates and, in most cases, are land-rich assets that are suitably zoned to offer future potential – three critical factors on most wish lists for commercial real estate investors,” Mr Parkinson said.

“We need to delve a little deeper to understand what works and what doesn’t – while some retail assets might be struggling due to overexposure to fashion and discount department stores, there are others that provide quality tenant mixes in ideal locations with non-discretionary offerings, and those that tick these boxes continue to be sought after and considered as secure retail investment opportunities.”

The recent RBA announcement, which cut interest rates to a record low of 1.25 per cent, is likely to fuel more demand and activity, Mr Parkinson said.

“There is a significant amount of capital from privates and syndicates looking for a home,” he said.

“Their money isn’t doing much in the bank and retail investment provides sound returns for these investors.”

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