Investor sentiment for retail properties rebounds

Australia witnessed deal volumes in the retail property sector surge 46 per cent year over year to $3.9 billion in the first half, signifying improvement in investor sentiment.

Knight Frank’s Australian Retail Review showed that NSW led the growth, with $1.4 billion worth of deals, followed by Queensland and Western Australia with $700 million each.

Ben Burston, Knight Frank’s chief economist, said that a return to income growth, along with leasing spreads and moving annual turnover (MAT) levels improvements, convinces investors about the sector’s resiliency.

“Vicinity and Scentre Group have reported growth of 3 per cent and 3.1 per cent respectively, while operators of smaller neighbourhood assets such as HomeCo reported a continuation of solid growth at 5.9 per cent,” said Burston.

“In addition, major shopping centres have experienced solid growth in MAT over the past year, with most major centres experiencing growth of 4 per cent to 6 per cent, supported by strong population growth and the gradual restoration of centre visitation after the disruption caused by the pandemic.”

Campbell Aitken, head of retail investments at Knight Frank, attributed the growth in the retail investment market to private capital.

“Domestic institutions and cross border investors have largely sat on the sidelines, while listed groups have opted to reduce their holdings and private investors have been the most active buyers,” said Aitken.

“Private investors tend to be more opportunistic and have historically been relatively active during periods of uncertainty and less liquidity, but as sentiment improves, we expect the investor base to broaden out with institutional capital likely to return.”

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