AS THE summer's sales come to an end, analysts have offered a mixed outlook for retail investment with signs that institutions and super funds have turned towards shopping centres, pursuing high yields, but Australia's continuing "retail revolution" means the long-term outlook remains unclear.
A report released by consultancy firm Urbis shows shopping centres have outperformed all other property sectors in the past five years, and will continue to draw significant institutional and superannuation fund investment.
Urbis national director for valuations and property advisory Matthew Cleary said Australia's largest shopping centres had returned 6.9 per cent per annum over the past five years, with results for the past three years even stronger at 9.6 per cent.
Mr Cleary said low growth and low inflation meant investors were now searching for strong yields, and retail centres appealed because of their limited supply, stable returns, consistent income streams and low vacancy rates.
Urbis' optimism is at odds with BIS Shrapnel's 10-year retail property forecast (2012-22), released last July, which suggested commercial property investors would shift from retail property to high-performing office and industrial developments because an oversupply of retail space occurring concurrently with increased online and/or overseas shopping meant Australia's retail heyday was over.
CBRE's national director of retail investments, Steve Lerche, said the outlook was unsettled.
"Investors will pay a premium for A-grade stock," he said, "but secondary stock is going to find it much, much tougher."
Lower interest rates meant some investors were looking to the retail sector for stronger yields but they were choosing property carefully.
Mr Lerche said Australian retailing had been relatively stagnant for 20 years or so and cheaper overseas travel (and the shopping it allowed), and increased online shopping, meant Australian shopping centres no longer had a captive audience and would need to innovate and mature.
Subregional shopping centres - those with 10,000-30,000 square metres and one discount department store and a supermarket - could do well, he said.