Retail assets outperformed the national transaction volumes of other commercial property sectors over Q1 2024 by at least $189 million as fund/syndicate investors maintained their appetite, driving 36% of the total $916 million traded for retail.

While fund/syndicate investors have buoyed the retail sector, market insights indicate demand from diverse capital sources in the second half of this year will outweigh supply of retail assets, according to Colliers Managing Director of Retail Capital Markets Lachlan MacGillivray.

“Enhanced appetite from institutional investors and Super Funds will see greater liquidity flow back into the retail sector in 2024, galvanised by the stabilisation of interest rates in addition to gradual and sustainable retail rental growth, enabled by the adjustment of rents during the COVID-19 period.” Mr MacGillivray said.

The first quarter of 2024 witnessed a notable increase of 1.2% in average retail gross face rents across all shopping centres nationally, propelled by an average total occupancy level of 98.8% and sustained consumer spending.

Occupancy costs reached an average of 13.9% in 2023 across all retail assets, down from 14.5% pre-pandemic.

Super, Major and Regional centres proved standout performers, maintaining robust consumer engagement with diversified offerings to achieve rental growth of 4.5% since June 2021.

“After Super, Major and Regional centres reported a +5.8% annual increase in total consumer sales last year, rental growth continued nationally over Q1 2024, with this asset class in Sydney even boasting +0.6% growth since the previous quarter.” Mr MacGillivray said.

“Retailers across Super, Major and Regional centres will continue to benefit from sustainable occupancy costs, which dropped from 19.3% pre-pandemic to 14.9%, over Q1 2024.

“The performance of Neighbourhood centres is also captivating investors, as high occupancy levels and resilient consumer spending for non-discretionary retail and supermarkets saw average gross face rents grow by +0.4% over Q1 2024, contributing to an overall growth rate of 4.3% since June
2021.”

Following a resurgence of Neighbourhood deals in the final quarter of 2023, when 37% of all transactions for this asset class occurred last year, a total of $277 million transacted for Neighbourhood centres over Q1 2024, up from $94.5 million for the same period in 2023, according to Colliers Director of Research Nik Potter.

“The groundswell of investor appetite for retail assets will continue to grow, despite sales data from February revealing that consumer spending only increased by +0.3% compared to this time last year.” Mr Potter said.

“While it is anticipated that retailers may encounter subdued trading conditions over the next three to six months, due to ongoing cost of living pressures, impending Stage Three Tax Cuts in July and potential rate cuts later in the year will set the stage for enhanced retail spending momentum.”

Related Reading:

Perth’s Midland Gate Regional Shopping Centre Transacts at $465 million - CBRE & Colliers 

Cairns Central sold to Fawkner Property for $390m - CBRE, Colliers and McVay Real Estate | Commo.

Woolworths Bomaderry Shopping Centre transacts for $40 million  - Colliers  | Commo.

Colliers Australian 2024 Market Outlook  | Commo.

From COVID crosshairs to 2023 most traded property asset: Retail fund/syndicate and private investment boost | Commo.