Retail sector defies prophets of doom with profits in sales

INVESTORS are defying the retail sector's doomsayers, with 83 big sales valued at $4.244 billion in 2011-12, 8 per cent more than the previous financial year.

By InvestSMART · 25 Aug 2012

By InvestSMART ·
25 Aug 2012

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INVESTORS are defying the retail sector's doomsayers, with 83 big sales valued at $4.244 billion in 2011-12, 8 per cent more than the previous financial year.

The latest Colliers International National Retail Investment Review 2011/12, which covers transactions greater than $10 million in Australia, found that nearly all of the top 10 largest sales in 2011-12 took place in the first half of this calendar year.

Lachlan MacGillivray, Colliers' national director of retail investment services, said investor demand for quality shopping centres was resilient despite volatility in monthly retail trade data and the structural challenges the sector was facing.

Also, interest in prime regional shopping centres had been strong from institutional investors from Australia and overseas, with demand exceeding supply.

"Increased demand came from domestic wholesale funds, as well as offshore sovereign and pension funds," he said.

Mr MacGillivray said overseas purchasers were keen to form joint ventures with local retail players. Sales of half-shares in prime assets had surged, with seven of the top 10 sales in 2011-12 being for 50 per cent shares. Overseas interest was particularly strong for prime regional and sub-regional assets.

Neighbourhood centres led activity with 35 sales, but interest in regional centres was historically high, with seven centres comprising 44 per cent of all sales by value.

"The number of sub-regional centres sold tripled to 15, which was the largest jump in sales volume of all sectors," he said.

Nora Farren, Colliers' research director, said it was the market's largest positive spread between bond yields and property yields in more than a decade, and demand for assets should outstrip supply for the rest of the year.

Ms Farren said the retail investment market had been strongest in Queensland, with 26 sales, including three of the top 10 sales recorded.

These were a 50 per cent share in the Myer Centre Brisbane by the Industry Superannuation Property Trust for $366 million, a 50 per cent share in the Cairns Central shopping centre for $261 million by Australian Prime Property Fund Retail, and Noosa Civic at Noosaville for $200 million, to the Queensland Investment Corporation.

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Frequently Asked Questions about this Article…

How large was Australia’s retail investment market in 2011–12 and did sales grow year‑on‑year?

According to the Colliers International National Retail Investment Review 2011/12, there were 83 major retail sales in Australia (transactions greater than $10 million) totalling $4.244 billion in 2011–12 — about 8% higher than the previous financial year.

Which types of shopping centres attracted the most investor interest in 2011–12?

Neighbourhood centres led by number with 35 sales, while regional centres were historically popular by value (seven regional centres made up 44% of sales by value). Sub‑regional centre sales also jumped, tripling to 15 — the largest increase in sales volume across sectors.

Were overseas investors active in Australia’s retail property market, and how did they invest?

Yes. Colliers reported strong interest from offshore sovereign and pension funds. Overseas purchasers often formed joint ventures with local players, and many top transactions were sales of 50% shares — seven of the top 10 deals in 2011–12 were half‑share transactions.

Did the timing of big retail sales concentrate in a particular part of the year?

Yes. The review found that nearly all of the top 10 largest sales for 2011–12 occurred in the first half of that calendar year, indicating a concentration of large deals earlier in the period.

Which Australian state showed the strongest retail investment activity?

Queensland was the strongest market for retail investment in 2011–12, recording 26 sales and including three of the top 10 transactions for the year.

Can you give examples of major retail transactions in Queensland mentioned in the report?

Examples cited include a 50% share in the Myer Centre Brisbane bought by the Industry Superannuation Property Trust for $366 million, a 50% share in Cairns Central purchased for $261 million by Australian Prime Property Fund Retail, and Noosa Civic at Noosaville sold for $200 million to the Queensland Investment Corporation.

What reasons did Colliers give for resilient investor demand in the retail sector?

Colliers’ national director Lachlan MacGillivray said investor demand for quality shopping centres remained resilient despite volatility in monthly retail trade data and structural challenges. Nora Farren, Colliers’ research director, also noted a large positive spread between bond yields and property yields — the biggest in more than a decade — which supported strong demand that was expected to outstrip supply for the rest of the year.

Who were the main types of investors driving demand for retail assets in 2011–12?

Demand came from domestic wholesale funds as well as offshore sovereign and pension funds. Institutional investors — both Australian and overseas — showed particular interest in prime regional and sub‑regional shopping centres.