Hundreds of people tuned in for the March edition of Between the Lines Live webinar where a panel of experts discussed the retail sector, which is tipped to be the asset class of choice in 2025.

Ray White head of research Vanessa Rader was joined by RWC Retail’s Michael Feltoe and Lachlan O’Keeffe to discuss the evolution of the retail sector and expectations for the year ahead.

Ms Rader said retail property saw a surge in investment at the end of 2024 and it’s pinned to be one of the premiere investment asset classes of 2025.

“There are many different sizes and formats of retail centres, and since Covid there’s been a lot of recognition for the role they play in our society. Prior, there was a focus on a shift to online retail and what effect that would have.” Mr O’Keeffe said.

“Those neighbourhood centres and local retail strips have shown to be really popular and we’ve seen that; people like to get out of the house and get their groceries and support local. Services like hair, nails and your local cafe, can’t be bought online.”

Mr Feltoe said the offering at retail centres have continued to evolve.

“It’s become more about service offerings and food and beverages. It all comes down to convenience,” he said.

“We’re all working from home more and we’ve seen an uptick in how often we go to our local retail centres.”

Mr O’Keeffe said yields for retail centres had remained tight.

“For retail centres in the sub $10 million category we’ve seen those transact in the 5 per cent range, where they used to transact at the 6 per cent mark. But it heavily depends on the tenancy mix, location, and how well it’s been maintained,” he said.

“The bigger supermarket-anchored centres in the $10milllion+ category seem to be hovering around the 6 per cent mark, however, they’re very tightly held so it’s harder to see those trends.” 

Mr Feltoe said retail assets continued to draw strong demand.

“We had a Hungry Jack’s anchored retail centre which had more than 700 enquiries, which as far as we’re aware is unprecedented” he said.

“We see an average of 350 enquiries on a sub-$5M retail centre.”

“It’s become easier for people to do their research on this asset class. Most people have an understanding of what retail property is because they go there every week.”

Mr Feltoe said fast food offerings were particularly popular.

“We can't service the demand from the buyer side of things,” he said.

“There’s less being built and most people who own them hold onto them for a long time. We anticipate that’s only going to continue.

“There’s many multinationals that have plans to expand but they’re not on track with their growth targets.”

He said fast food offerings were easy for investors to understand.

“Most people have eaten at a fast food restaurant and can see if it’s busy.

“You can stand out the front and see how it’s performing.

“We sold Red Rooster in Nundah on a 3.81 per cent yield.”

Ms Rader said the large format retail (LFR) sector, formerly known as the “bulky goods” sector, had benefitted from the strong housing growth.

Mr O’Keeffe said there'd been a lot of demand from funds and institutions.

“These LFR assets usually have a national tenant and on a large land holding,” he said.

“The rents are much more sustainable and have more room for growth. That’s where they see a lot of value.

“They’re incredibly tightly held, the people who own them don't want to sell because of those fundamentals.

“It’s the same as retail centres providing services because people can’t get their hair cut online -  most people won’t buy a bed online because they want to go and test the mattress first.”

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