RETAIL Introduction

Capital Markets Australia & New Zealand Investment Review

Year in Review and Outlook 2019

RETAIL Introduction

Introduction Total Sales Strong investor demand in the 2018 was a big year for Neighbourhood of Sub-Regional assets were sold during the The solid trading results of retail assets $8.25bn  12% YOY Australian retail property market shopping centres with 46 sales recorded, year. This represents more than a quarter in Australia reaffirm investor confidence making this the most active retail category. of the overall retail investment market in the Australian retail market. Despite continued throughout 2018, Affordability and exposure towards the and a significant increase of 118 per cent challenges around the world, we are however, investment volumes strong performing non-discretionary compared to the year prior. There were strongly convinced that brick-and-mortar were constrained by the lack sector were the primary drawcards that 20 deals with an average transaction retailing is here to stay and will continue 25% OF TOTAL INVESTMENT SALES (BY VALUE) of quality stock available on evoked strong interest from investors value of $104 million. Local institutional to transform and adapt to the paradigm shift WERE SUB-REGIONAL CENTRES the market. Despite this, high into the sector. Investment activity for investors were the most active buyers in consumer behaviours. In this report we will explore the future of shopping centres quality centres underpinned by Neighbourhood centres was further boosted of Sub-Regional assets. by SCA Property Group’s acquisition of in Australia and the ways new technologies Top Category (BY VALUE) SUB-REGIONAL strong catchments and trading a $573 million portfolio from Vicinity The Regional shopping centre market also are transforming the brick-and-mortar performance continued to attract Centres. Out of the 10 assets purchased experienced a strong year of activity with retailing experience of customers. We will strong yields. During Calendar Year by SCA Property Group, there were seven over $1.93 billion worth of assets changing also assess impediments and opportunities $2.08bn 2018, we recorded $8.25 billion Neighbourhood centres with a combined hands over CY18. Colliers International in the market and the strategies property in retail property transactions value of $362.1 million. transacted more than half (52 per cent) owners can embrace to deal with them. Top Category of the total sales value of Regional shopping (BY VOLUME) NEIGHBOURHOOD CENTRES (over $10 million), which is In total value terms, Sub-Regional centres centres this year including the record We hope you find this publication useful, and 12 per cent lower than the all time were the most active asset class during portfolio sale of a 50 per cent stake in look forward to engaging with you further Assets high recorded in the prior year. CY18. More than $2.08 billion worth Pacific Werribee and Pacific Epping. on the Australian retail investment market. 46 35% OF TOTAL NUMBER OF SALES WERE NEIGHBOURHOOD CENTRES 79% OF TOTAL TRANSACTION VALUE WAS ACQUIRED BY Domestic Investors

All aggregate figures are in $AUD and reflect transactions above $10 million.

Year in Review Introduction Key Findings Major Transaction Overview NZ Overview The Experience Economy Investment Outlook Valuation Outlook Debt Advisory 2018 Retail Transactions Authors/Team and Outlook 2019 2 2 Key Findings Retail Property Sales TOTAL VALUE A total of $8.25 billion in retail assets have transacted in Australia 10 (Billion $AUD) during CY18. This is 12 per cent 9.39 lower than the total transaction 9 8.45 value in the previous year. 8.25 8 7.50 7.29 The reduced quantity of transactions can 7.22 7.22 7 be attributed to a confluence of factors, including the lack of quality stock on the 6 market, in conjunction with mixed sentiment in the Australian retail market. 5

4 3.51 3.33 3 2.87

0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year

Retail Property Sales BY SECTOR

10 (Billion $AUD)

0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year Key Findings  CBD  Regional  Sub-Regional  Neighbourhood  Large Format Retail  Freestanding  Other

Source: Colliers International

Sub-Regional centres were the most transacted retail asset class with almost $2.08 billion worth of sales in CY18. This is more than double (118 per cent) the $1.76bn total amount sold in CY17. $495.2m Total $8.25bn   32% The total number of retail investment 3% transactions decreased YoY between CY17 to CY18 from 154 to 133 respectively as owners were reluctant to relinquish quality stock. Neighbourhood shopping centres were the category with the highest number of transactions throughout the retail investment asset class. However, the total number $91.1m of transactions within the Neighbourhood $3.17bn category were lower YoY with 46  57%  22% transactions compared to 66 in CY18 and CY17 respectively. $2.68bn  71%

$41.3m NO MAJOR TRANSACTIONS RECORDED OVER THE CY18 PERIOD  65% Retail Property Transactions NUMBER OF TRANSACTIONS

200 (Transactions) 180 160 140 120 100 80 60 40 20 Key 0 Findings 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year Source: Colliers International

16% CBD New South Wales continues to be the most active state in Australia with over $3.17 billion worth of asset transactions, 23% Regional accounting for 38 per cent of the total retail investment market.

31% Sub-Regional NSW State Share of Total Transaction Value 12% Neighbourhood Retail Sales 1% 6% Large Format Retail $91.2m 6% Freestanding 6% 6% Other 1% $495.2m $41.3m

4% CBD

37% Regional 21% 34% Sub-Regional VIC 14% Neighbourhood $1.76bn Retail Sales National 4% Large Format Retail

5% Freestanding $8.25bn

2% Other 38%

12% CBD 33% $3.17bn

12% Regional $2.68bn

3% Sub-Regional QLD Retail Sales 32% Neighbourhood

35% Large Format Retail

Key 5% Freestanding Findings 1% Other

Source: Colliers International

63% Institution 61% Institution 53% Institution

37% Private 38% Private 46% Private

1% Other 1% Other NSWNSWNSW VICVICVIC QLDQLDQLD

The market was dominated by Retail Property Sales Proportions Retail Property Sales domestic investors who have BY SOURCE OF CAPITAL & ASSET CLASS BY PURCHASER TYPE purchased a total of $6.47 billion worth of assets. Overall, almost 5 ($AUD Billion) 79 per cent of the total value 100% 4

of assets were purchased by Ostore 3 local buyers.*

50%c 2

Offshore capital accounted for 21 per cent st i of total value or $1.76 billion worth of 1 retail assets. Overseas investors were 0 Dom e 0 most active in the Sub-Regional and CBD 0 Domestic 0.5 Offshore 1.0 Institution 1.5 Private Other 2.0 asset markets, purchasing $656 million $AUD Billion and $420 million respectively.  CBD  Regional  Sub-Regional  Neighbourhood  NSW  VIC  QLD  WA  SA  TAS ○ Sub-Regional ○ Regional ○ Neighbourhood ○ Large Format Retail ○ CBD ○ Freestanding ○ Other *Includes undisclosed investors  Large Format Retail  Freestanding  Other

Purchaser Source of Capital BY SOURCE OF CAPITAL

2018 78.5% 21.4% 2017 86.7% 13.3% 2016 65.3% 34.7% 2015 69.5% 30.5% 2014 88.9% 11.1% Key Findings 0% 20% 40% 60% 80% 100%

○ DomesticDomestic ○ OffshoreOshore

0 20 40 60 80 100 Major Soul Boardwalk, Transaction QLD CBD Centre Overview SALE PRICE $90 million

DATE June 2018

VENDOR PwC (Reciever & Manager)

PURCHASER Private Investor

SOLD BY Colliers International

Major Transaction Overview CBD Centres Transacted CBD $826m 7% YOY Nationally, CBD assets reported a 7.0 per cent increase in the total transaction value recorded, rising from $771.7 million in CY17 to approximately 13 Transactions $826 million across 13 assets in CY18 – Six of which transacted in Sydney, four in Melbourne and three in Brisbane. Sydney The majority of activity within this sub-sector for CY18 61% was within the Sydney CBD region, with approximately OF TOTAL CBD SALES $503 million in sales, which by dollar value, accounted for 61 per cent of retail CBD transactions nationally. Average Initial Yield The sale of one of Sydney’s most famed public precincts, King Street Wharf, marked the single largest pure 5.03% play retail transaction within this sub-sector for CY18. FOR TRANSACTIONS The 99 year-leasehold was acquired by private real estate IN THE SYDNEY CBD group Markham from LaSalle Investment Management for $125.5 million at a fully leased yield of 6.03 per cent. Largest Pure Retail Transaction The sale of the Bvlgari Flagship store on Castlereagh KING STREET WHARF Street in Sydney’s CBD reinforced the demand for rarely traded trophy assets. The property was acquired by German fund Deka Immobilien for $58.6 million at a $125.5m 4.75 per cent cap rate and occurred after a new 10-year lease to Bvlgari and a full refurbishment of the store.

SOLD BY Colliers International

Year in Review Introduction Key Findings Major Transaction Overview NZ Overview The Experience Economy Investment Outlook Valuation Outlook Debt Advisory 2018 Retail Transactions Authors/Team and Outlook 2019 8 8 Westfield Eastgardens, NSW Major Regional (50% interest) Transaction Overview SALE PRICE $720 million

DATE July 2018

VENDOR Terrace Tower Group

PURCHASER Scentre Group

Major Transaction Overview Regional Centres Transacted Regional $1.935bn With approximately $1.935 billion in  17% YOY transactions recorded across only four assets (all partial interests) as at the end of CY18, this sub-sector represented 3 approximately 23 per cent of the total Transactions retail investment market, which is a OF 4 ASSETS decline from CY17 high of $2.3 billion across four assets. Regional Transactions The largest single transaction during CY18 was the combined sale of a 50 per cent interest in Pacific 23% Werribee and Pacific Epping for approximately $1 billion OF THE TOTAL RETAIL INVESTMENT MARKET in Q1 of CY18. The centres represented the last two privately owned and managed prime Regional Centres in Victoria. Most Active State VIC The deal was brokered by Colliers International $1bn and accounted for approximately 52 per cent of all 52% OF TOTAL REGIONAL Regional sales and 12 per cent of Australia’s total retail TRANSACTION VALUE investment market value for CY18.

New South Wales and Queensland each saw one Domestic Investors transaction – In Q3 of CY18 Scentre Group acquired a PURCHASED 50 per cent share of Terrace Tower Group’s Westfield Eastgardens in Sydney’s east for $720 million on 89% a 4.25 per cent cap rate and in Q2 of 2018 Vicinity OF REGIONAL CENTRES TOTAL VALUE (VRP) sold their 50 per cent stake in Grand Plaza Shopping Centre in Brisbane to Invesco Real Estate for $215 million at a cap rate of 5.50 per cent.

DATE May 2018

SOLD BY Colliers International

SALE PRICE $206 million

DATE December 2018

VENDOR Blackstone

PURCHASER Moelis & SPH REIT

SOLD BY Colliers International

DATE December 2018

VENDOR Vicinity Centres Fort Street Real Estate PURCHASER Capital Fund IV SOLD BY Colliers International

Major Transaction Overview Sub-Regional CY18 was a robust year for Sub-Regional transactions. With over $2.08 billion in transactions recorded across 20 assets, the Sub-Regional sector represented 25 per cent of the total Centres Transacted retail investment market. By dollar value, this is more than double CY17 levels of approximately $955 million across ten assets. $2.08bn  105% YOY Institutional investors dominated transactions of Sub-Regional centre’s nationally, accounting for 66 per cent of purchaser activity and an overwhelming 89 per cent of vendor activity. 20 Transactions New South Wales and Victoria dominated this sub-market with eight transactions totalling $977 million and $918 Most Active State NSW million accounting for 47 per cent and 44 per cent of total sales, respectively. Queensland, South Australia and Western Australia each recorded one transaction. $977m 47% OF TOTAL VALUE The most significant Sub-Regional centre transaction during CY18 was the sale of a 100 per cent interest in Figtree Grove Shopping Centre in Q4 of CY18. Largest Transaction The Centre was acquired as a Joint Venture between SPH REIT and Moelis in a deal facilitated by Colliers $206m International for $206 million at a cap rate of 6.0 per cent. FIGTREE GROVE, NSW The deal represented SPH REIT'S first acquisition in Australia and a partnership with Moelis Australia.

Overview SUB-REGIONAL

SALE PRICE $117 million

DATE June 2018 Vicinity Enhanced Retail VENDOR Fund (VERF) Charter Hall Retail REIT & PURCHASER Charter Hall Prime Retail Fund (CPRF) SOLD BY Colliers International

DATE August 2018

VENDOR Vicinity Centres

PURCHASER APIL

SOLD BY Colliers International

Major Transaction Overview Neighbourhood Neighbourhood Centres Centres Transacted Neighbourhood centres sales experienced $1.66bn a sharp decline YoY from CY17 to  27% YOY CY18 with a total of $1.66 billion across 46 assets, compared to a total transaction value of $2.29 billion in CY17 across 46 66 assets. Transactions Queensland recorded $564 million worth of transactions in CY18 and by dollar value was the most active state, accounting for 34 per cent of the sub-sector. Victoria, Most Active State QLD New South Wales and Western Australia also performed well in CY18 accounting for 23 per cent, 22 per cent 34% and 20 per cent of sales respectively. OF ALL NEIGHBOURHOOD TRANSACTIONS The largest individual transaction within the sub-sector was Hurstville Central in the Sydney Metropolitan area purchased by an Offshore Unlisted Fund for $119.5 85% million. The leasehold property sits directly above the Acquired by Hurstville train station and sold at a cap rate of Domestic Investors 6.07 per cent with 42 years remaining on the leasehold.

SCA Property Group were the most active purchaser Largest Transaction within the sub-sector, acquiring eight Neighbourhood centres in CY18 (seven of which formed part of the $119.5m Vicinity Portfolio deal) accounting for over 20 per cent HURSTVILLE CENTRAL, NSW of all Neighbourhood centre sales.

SALE PRICE $43.1 million

DATE May 2018 Charter Hall Retail REIT VENDOR & Partner PURCHASER Private Investor

SOLD BY Colliers International

SALE PRICE $80 million

DATE November 2018 The GPT Group (16.67%) & VENDOR The GPT Wholesale Shopping Centre Fund (83.3%) PURCHASER Undisclosed

Major Transaction Overview Large Format Retail / LFR Centres Transacted $1.03bn Outlet Centres  48% YOY Overall, $1.03 billion worth of investment sales occurred across 21 assets in the Large Format Retail sub-sector in CY18, 21 considerably less than the CY17 high of Assets Transacted $1.98 billion.

Queensland recorded the highest sales volume within the Most Active State QLD sub- sector with $614 million transacting over ten assets accounting for 60 per cent of total Large Format Retail $614m sales in CY18. New South Wales was also prominent 60% OF TOTAL VALUE within the sub-sector totalling $205 million of transactions over four assets representing 20 per cent of sales in CY18. LFR accounted for The largest Outlet Centre transaction was the acquisition of the 25 per cent stake in the Harbour Town Gold 12% Coast for $180 million. The Centre was acquired by the of Total Retail Lendlease managed Australian Prime Property Fund Retail Investment Market at a cap rate of 4.75 per cent in Q4 of CY18.

The $170 million sale of Homemaker The Valley Centre Largest Outlet Transaction in Brisbane was the largest single asset transaction for the Large Format Retail sector in CY18. The Centre $180m was purchased by Arkadia in Q3 of CY18 on a cap rate 25% INTEREST of 7.31 per cent. HARBOUR TOWN GOLD COAST

Largest Large Format Retail Transaction $170m HOMEMAKER, THE VALLEY

DATE July 2018

VENDOR Woolworths Group Limited

PURCHASER Private Investors

SOLD BY Colliers International

Major Transaction Overview Freestanding The Freestanding retail sub-sector experienced steady growth in CY18 with $457 million worth of transactions Freestanding across 21 assets, representing an Retail Transacted increase of 52 per cent YoY from $457m CY17 levels of $302 million.  52% YOY New South Wales was the top performer with $194 million of investment sales across seven assets, which by dollar value accounted for 42 per cent of the freestanding retail market in CY18. Victoria 21 also performed strongly, totalling $129 million of Assets Transacted transactions across eight assets, reflecting 28 per cent of sales nationally for the sub-sector in CY18.

Largest transaction The $45.7 million Woolworths Portfolio transaction WOOLWORTHS LISAROW was the highest recorded sale in the Freestanding & NELSON BAY, NSW market. Facilitated by Colliers International, the sale consisted of two Freestanding supermarkets $45.7m in Lisarow and Nelson Bay in New South Wales. The assets were offered with 100 per cent interest and sold in Q3 of CY18 with a combined cap rate of Most Active State NSW 5.70 per cent to private investors.

$193.5m Throughout CY18 private investors heavily dominated 42% OF TOTAL FREESTANDING RETAIL VALUE the Freestanding retail market, representing $339 million of purchases and reflecting 74 per cent of total sales volume.

DATE September 2018 Coles Property VENDOR Developments Group PURCHASER Private Investor

SOLD BY Colliers International

SALE PRICE $40 million

DATE February 2018

VENDOR NZRPG

PURCHASER The Strand Trust

SOLD BY Colliers International

New Zealand Investment Market High Demand for Quality Investments

A number of trophy assets sold during Some of the largest deals in CY18 were the year, helping boost the total value of outside of Auckland, primarily in Wellington transactions in 2018. Retail property sales and Canterbury. Adelaide-based Angaet reached $600 million in CY18, representing Group added to their New Zealand retail a 2 per cent increase from CY17 for assets portfolio, purchasing Porirua’s North City sold over $5 million. While total sales value Shopping Centre in Wellington from Kiwi increased, the total number of sales declined Property Group for $100 million in in 2018 to 34 from 44 in CY17, suggesting Q2 CY18, slightly below book value. South investors’ appetites are leaning towards the City Shopping Centre in Christchurch sold higher end of the value spectrum. Auckland for $46 million to a private investor in had the majority share of retail property Q2 CY18 at a cap rate of 8.60 per cent. sales for CY18 with provisional data showing 44 per cent of total sales by value Prime CBD cap rates for strip retail in transacted in Auckland. Example sales in Auckland average between 4.5 per cent Auckland include, Highbury Shopping Centre and 6.0 per cent which has been trending which sold for $40 million at a cap rate of down since December 2000 where yields 7.16 per cent and Mitre 10 in New Lynn was averaged between 7.7 per cent and 8.2 per acquired for $29.3 million at a cap rate of cent. This is a similar story to Wellington and 5.25 per cent. Christchurch, albeit, the rate of compression has reduced over CY18 compared to CY17.

All aggregate figures for New Zealand referenced herein are in $NZD and reflect transactions aobve $5 million

SALE PRICE $100 million

DATE April 2018

VENDOR Kiwi Property Group

PURCHASER Angaet Holdings

SOLD BY Colliers International

Outlook

Investment cap rates throughout CY18 remained In contrast, prime retail assets are still highly strong as a reflection of the low interest rate sought after and receive significant competition, environment. However, like markets globally, and this has led to prices reaching new levels. secondary retail assets or property positioned In addition, the retail development pipeline has in lower performing catchments in New Zealand reached an all-time high this cycle, dominated are subject to high levels of scrutiny. by major shopping mall owners committed to a new development phase. With the addition of new supply and current owners looking to deploy capital into other opportunities, 2019 is shaping up to be another busy year for retail investment activity. Major Retail Sales WELLINGTON BY VALUE

AUCKLAND $1.41m 383% $264m 41% CANTERBURY

AVERAGE PRIME AVERAGE PRIME AVERAGE PRIME RENTS ($/SQM) YIELDS (%) CAPITAL VALUES ($/SQM) $76m Q4 2017 Q4 2018 % Var YoY Q4 2017 Q4 2018 % Var YoY Q4 2017 Q4 2018 % Var YoY REST OF NEW $118m TOTALS $600m 163% AUCKLAND $1,020 $1,017 -0.3% 5.55% 5.55% 0 bps $18,989 $18,920 -0.4% ZEALAND

WELLINGTON* $1,308 $1,320 0.9% 6.76% 6.70% -6 bps $17,203 $17,406 1.2% 41% 1.6%

Source: Colliers International Research Source: Core Logic, Colliers International Research *Gross rent. Note: Provisional sales for property in NZD $5 million or more for CY18

FEB MAR DEC

RETAIL – Scentre Group ECONOMY – Colliers’ RETAIL – Angaet Holdings RETAIL – The retail announces it is investing $790 Commercial Investor Confidence APR purchases Kiwi Property’s North NOV development pipeline has million in the redevelopment survey results for March 2018 City Shopping Centre in Porirua reached an all-time high JAN of Westfield Newmarket, shows a sharp rebound in for $100 million, slightly under this cycle, dominated due for completion in Q4 Auckland post-election reaching book value. by major shopping mall of CY19. The new complex a net positive of 43 per cent in owners committed to a new will be home to Auckland’s overall net confidence. development phase. It is first David Jones store. estimated just under 180,000 ECONOMY – Auckland will ECONOMY – New Zealand square metres of retail space RETAIL – The $223 million host the America’s Cup 36 MAY unemployment rate falls to in Auckland will be added to Galleria expansion at Sylvia Park after an in-principle agreement 4.4 per cent in the three months supply in the coming years. has been given the green light between Auckland Council, the to March 2018, the lowest level in adding 18,000 square metres Government, and Emirates Team nearly a decade. of retail space. Farmers is New Zealand. taking 8,000 square metres RETAIL – Christchurch’s South RETAIL – Annual electronic in the new area. City Shopping Mall sold for transactions in October 2018 about $50 million to a local OCT grew 5.0 per cent by value RETAIL – $78 million will be private investor. relative to a year ago. spent on the expansion of Botany Town Centre, one of Auckland’s largest regional shopping centre.

RETAIL – Stride Property sold ECONOMY – Retail trade by value ECONOMY – Colliers’ three Bunnings properties JUN has shown continual positive SEP Commercial Investor in Hamilton, Rotorua, and growth since January 2013. Confidence survey results Palmerston North for for September 2018 shows a $78.5 million to Investore rebound in retail confidence Property Limited. from June in Auckland, Wellington and Christchurch. RETAIL – NZRPG’s Highbury ECONOMY – New Zealand Shopping Centre in Birkenhead, JUL AUG Auckland sold for $40 million unemployment rate falls to The Strand Trust at a cap further to 3.9 per cent, the rate of 7.16. lowest level in nearly a decade.

Year in Review Introduction Key Findings Major Transaction Overview NZ Overview The Experience Economy Investment Outlook Valuation Outlook Debt Advisory 2018 Retail Transactions Authors/Team and Outlook 2019 2121 The Future of There are many factors Shopping Centres in Australia: that have underpinned the The Experience Economy resilience of the Australian retail property market, but There is no denying that the global retail sector is navigating through uncharted waters as consumers fundamentally adjust their priorities the main catalysts include: and behaviours.

Despite global headwinds, the Australian Furthermore, numerous case studies have retail property market has remained shown that online and offline retailing in Australian shopping centres are relatively resilient and continues to grow. Australia are complementary as opposed to predominantly anchored by supermarkets This is due to the fact that Australian supplementary as an overwhelming number and food-based retailers which are more shoppers continue to enjoy the shopping (78 per cent) of Australian consumers would experience in brick-and-mortar stores. shop both online and offline simultaneously defensive against online retailing. Approximately one-fifth of Australian (Rakuten Marketing, 2018). Only 2.0 per cent consumers prefer to shop exclusively offline, of Australians would shop exclusively The average visitation per catchment ratios the highest proportion of any country within online, one of the lowest rates in the world. across shopping centres in Australia are the Asia Pacific region according to surveys In comparison, 7.0 per cent of American by Rakuten Marketing in 2018. As a result, consumers are making their retail purchases amongst the highest in the world. retail sales at brick-and-mortar stores in online exclusively (Google Surveys, 2018). Australia still account for about 95 per cent As such, Australian retailers are increasingly Per capita supply of retail space in Australia of all retail activity, outperforming the US adopting a multi-channel retailing strategy is still relatively low compared to other (90 per cent) and the UK (82 per cent). for their business. Notwithstanding the sound fundamentals, Australian shopping developed markets. centres must continuously reinvent themselves to be relevant to the future The Australian population continues to grow generation of shoppers. at one of the fastest rates in the world, with

In this analysis, Colliers International the bulk of this growth being underpinned by examines the megatrends that are shaping growth in working-age population. the future of Australian consumer behaviour and identifies the courses of action that owners can take to future proof their assets. Australian consumers are distinctive to the rest of the world, with a strong sense of attachment to the local communities and favouritism towards fresh produces and locally-made products.

The Experience Economy

Welcome to the experience economy

Australia has well and truly transitioned Previous research studies have shown into an experience economy. Australian that shoppers are willing to spend more consumers are spending significantly more for the same product or service if they on entertainment and leisure activities than receive a positive experience during the discretionary commodities. buying process. The rise of the experience economy will have defining implications According to the latest data from on the Australian retail property market. Roy Morgan Research, over $132 billion Landlords must re-assess in-store strategies was spent on lifestyle and leisure services and tenancy mixes to bring the shopping compared to $107 billion spent on material experience to the next level. In addition, new merchandises and $103 billion on groceries performance metrics such as ‘experiences over the 12 months. In other words, per square metre' will become more Australian consumers are putting a greater prevalent in the future in addition to the emphasis on experiences that enrich their traditional metrics of ‘revenue per square lives rather than material objects. metre’ or foot traffic.

Against this backdrop, the concept of selling experiences has transcended beyond theme parks and theatres to all aspects of business. As customers unquestionably desire experiences more than ever in an experience economy, with products and services to become commodity-like being replicated and outsourced with relative ease. The ability What do Australians spend their money on? to provide a memorable experience that wraps around the product or service is the only way for companies to differentiate their Leisure & Discretionary offerings against future competition. Entertainment commodities Groceries

$132bn $107bn $103bn   

Source: Roy Morgan 2018

Health and Wellness Uses are Gaining Ground Personalisation and Micro-Segmentation Enabled by New Technologies

Recent years have seen health and wellness Moreover, sustainability initiatives such Retailers and marketers must constantly find better Shopping centre operators have already been spring up as a vital component of the tenancy as green space, solar power, LED lighting ways to personalise the customer experience. This trialling new technologies to take personalisation mix across shopping centres in Australia. and open-air ventilation must be a critical is because experience resides in the mind of the and micro-segmentation to more intimate levels. component of the next generation of consumer and no two shoppers will have the same Biometric and facial recognition systems upon Incorporating health and wellness uses shopping centres. These initiatives are not experience. The more personalised the interaction entry into the shopping centre can recall a within a shopping centre will not only only cost-effective but also demand-driven the richer the experience and the more they will customer’s previous visits and can predict what bring better synergies with other uses as Australian consumers are increasingly spend. With the help of advanced technologies in they are likely to purchase and whether the correct but also optimise space efficiency. This becoming health and environmentally recent times retailers are now able to obtain deeper size is available. Smart mirrors and interactive trend is further supported by the aging of conscious. Research has shown that insights into customer behaviours. Companies now change rooms will allow shoppers to customise the Australian population and increased provision of green walls and community know what the shopper wants to buy before they their outfits without the hassle of trying them on. spending on healthcare services. More gardens within buildings will lead to might know themselves. Smart beacons can communicate directly with than one in seven Australians were aged increased levels of wellbeing and happiness the customer on the go and track their movement 65 and over as at 2017. Senior Australians of both tenants and patrons. This, in turn, New technologies have also paved the way for within the centre. are projected to more than double by 2057. will increase property values and lower a micro-segmentation approach. The goal of Clinics, healthcare centres, yoga studios, vacancies over the long run. Installation of micro-segmentation is to precisely segment Eye scanners and smart advertising screens can gyms and wellbeing workshops are some of solar power panels, LED lighting and more customers into extremely small groups, even at detect the mood of viewers, predicts their age and the more popular uses within this category efficient ventilation systems will not only individual levels, in order to maximise the utility gender and how many times the screens were that are taking up significant spaces in heighten wellness levels but also future of each customer to the business and to satisfy viewed and for how long. Smart speakers and voice shopping centres across the country and will proof the asset against rising energy costs in his or her specific needs. shopping technology will be the next big thing in continue to intensify over the next decade. the future. the retail world. It is estimated around half a million Australian households owned a smart speaker at the end of 2017, a massive increase of 50 folds from less than 10,000 a year prior. According to forecasts by Telsyte, around a third of Australian households (3 million) will have a smart speaker by 2022.

Placemaking to be Influenced by the Rise of Localism

The past decade has witnessed the rise Each locale will have distinct needs and of the localism sentiment within Australia requirements and shopping centre owners consumers. Once a social and economic need to critically embrace an intimate phenomenon, localism is becoming a major understanding of the catchment population. influence on consumer preferences and The rise of localism will also channel purchasing decisions. Neighbourhood increased demand for additional public and residents are becoming increasingly attached community spaces. Additionally, placemaking to their local community and more involved initiatives such as community gardens, with the stewardship of the places they share. youth start-up or co-working spaces or child play facilities are become more prevalent This is evidenced by the fact that almost across shopping centres of the future. To 90 per cent of Australians prefer to shop be relevant to the future, retail spaces must regularly at their local stores and the become an integral part of the social fabric majority are very much interested in local and must immerse them. affairs and community events, according to surveys by Relationships Australia. Our analysis also reveals that Australian shopping centres have one of the highest footfall to catchment ratios in the world. Of note is Westfield Bondi Junction with a pedestrian to catchment per annum ratio of 46:1, while those for Westfield Fountain Gate and Chadstone are 29 and 21 respectively. More than ever, shopping centres, not just neighbourhood centres but also Regional and Sub-Regional shopping centres, must become more deeply entrenched and connected with their catchment community.

Westfield Commera, QLD

Case Study: Westfield Hurstville In January 2015, Myer ceased trading at Westfield Hurstville allowing co-owners Scentre Group and Dexus Wholesale Property Fund the opportunity to back-fill the space with an array of exciting new retailers, forming part of a major $105 million redevelopment which would ultimately re-energise and benefit the centre in a time where retail closures were accelerating.

The back-fill took the underperforming Myer local community, included a rooftop alfresco dining department store turning over approximately precinct with a community garden, modification Myer: Last full year of trade $30 million annually and replaced the space with of the existing Event$430.8m Cinema to offer a V-max a selection of mini major and specialty retailers screen experience, a Woolworths supermarket, including;Myer Cotton Vacated On, JB1-Jan Hi-Fi / Redevelopentand Rebel Sport Works which commenced Big W discount$409.3m department store and an extensive together were said to have contributed approximately ambience upgrade. $120 millionRedevelopment in turnover completed in the first year of trade. $509.2m The redevelopment was completed at the beginning In additionFirst to full the year back-fill of stabilised of the tradeex-Myer space, of 2016, and since Myer’s last full year$542.9m of trade in the wider redevelopment of the centre, which was 2014 the centre’s Moving Annual Turnover (MAT) designed specifically to address the needs of the has grown at a CAGR of 8.0 per cent. 0 100 200 300 400 500 600

MAT Movement (2014 -2017)

600 500 400 300 $430.8m $409.3m $509.2m $542.9m First full year of $430.8m Myer Vacated Redevelopment 200 Myer: Last full completed stabilised trade $AUD million $AUD year of trade 1-Jan/Redevelopment 100 Works commenced 0 2014 2015 2016 2017

Source: Scentre Group Property Compendium 31 Dec 2014, 2015, 2016 & 2017

Year in Review Introduction Key Findings Major Transaction Overview NZ Overview The Experience Economy Investment Outlook Valuation Outlook Debt Advisory 2018 Retail Transactions Authors/Team and Outlook 2019 2626 The Experience Economy The Living Centre of the Future “a destination you visit not because you have to, but because you want to”.

Case Study: Westfield Coomera Westfield Coomera is Scentre Group’s first greenfield development. The development was delivered in partnership with QICGRE in response to the changing nature of consumer habits and opened its doors in October 2018, creating the Gold Coast’s ‘Living Centre of the Future’.

Currently home to more than half a million Inspired by the garden and an outdoor people, the Gold Coast is Australia’s sixth dining room, Westfield Coomera delivers largest city and has one of the fastest a new era food court concept that delivers growing populations in the country, and over an experience that flows from inside to half of that population growth has moved outside to a casual dining area that features into Coomera and surrounds. small courtyards that encourage discovery and exploration. The total trade area serviced by Westfield Coomera was estimated at 146,130 in 2016, Scentre Group Chief Executive Officer, and is forecast to reach 162,920 in 2019, and Peter Allen says extend to 200,440 residents by 2025. The development was delivered in response to “At the heart of this evolution from shopping this existing and forecast growth, with the centre to living centre is curating an intention of establishing a considered retail exceptional retail, services and product mix mix, reflective of customers’ social, outdoor that our customers will love and that reflects and family lifestyles. the local community. Westfield Coomera brings this to life with 40 per cent of the Spanning 59,000 square metres of indoor- centre dedicated to dining, entertainment and outdoor retail, the space offers 140 specialty services. It is a new world of experience and stores, a two-level dining and entertainment is a destination you visit not because you have precinct, market-style fresh food and an to, but because you want to.” iconic, purpose-built recreational park, known as; ‘The Backyard’ which includes an The centre sets a new standard for the amphitheatre and multipurpose events area, industry, having been designed to create a flexible community social and leisure spaces unique experience that reflects the lifestyle of and play zones for kids and youth. the local community, which now on completion forms part of the social infrastructure. Westfield Coomera, QLD

Investment Outlook The Australian retail market is expected to remain supported by sound fundamentals and a positive economic outlook. The continuing strong population growth in conjunction with an immense investment program in infrastructure projects across the country will be the primary catalysts underpinning retail consumption and space demand going forward.

Consumer spending continues to accelerate The positive economic conditions are on the back of lowering household savings expected to deliver positive spill over effects and positive employment growth. In addition, to the retail property market. The eastern infrastructure investment is expected to seaboard markets of Sydney, Melbourne be the most important contributor to and Brisbane are anticipated to remain economic growth over the coming years. the most attractive and dominant markets The Australian economy is forecast to for retail investors, while the Perth retail expand by over 3.0 per cent per annum market is gaining traction and Adelaide over the next three years, with this growth to remain stable. Prime and Super Prime being boosted by improvement in consumer assets, particularly those in a quality location confidence and business sentiment. and with good demographics, are still in high demand. Investors are expected to increasingly place a greater emphasis on active asset management and focus on increasing engagement levels with the local catchment population. Against this backdrop, pricing levels of retail assets in Australia are becoming more attractive in comparison to other asset classes, which will continue to entice investor interest from both local and offshore groups.

Valuation Outlook: Net Operating Income Implications: The Retail Landscape PRESENT VS. FUTURE

As the retail landscape in this Country • Dark stores that serve as distribution continues to evolve and words like ‘recycle’ points for click-and-collect retailing. Department Department and ‘backfill’ move to the boardroom, what will 20% 17% • Continued take-up of brick-and-mortar Stores Stores a shopping centre look like in 20 years time? space by Amazon and Alibaba as they Discount Discount • Trade categories will blur and expand as endeavour to ‘plug the gaps’ between 18% 12% Department Department alternate retail uses enter conventional retail and e-retail. Stores Stores retail shopping centres. A case in point PRESENT FUTURE • R&D or Retail & Development will become being, car manufacturer shop fronts, with 3% Non-Retail Regional Regional 12% Non-Retail commonplace within the existing retail the consumer booking a test drive online footprint as larger amounts of space and test driving the relevant model on-site. 59% Other Retail 59% Other Retail and common mall areas are dedicated • Space that is currently allocated for car to new technology. parking, will be significantly reduced, as • Reliance on renewable energy will the take up of driverless cars gathers increase as large areas of space are momentum. This phenomenon will provide dedicated to solar photovoltaic technology, Department Department large tracts of useable land in prime 1% 1% resulting in significant reductions in Stores Stores locations that is suitable for alternate uses operating expenses. The take-up of such as hotels, aged care and retirement, Discount Discount this technology is expected to grow 31% 22% medical centres etc. Department Department exponentially over the next five years as Stores PRESENT FUTURE Stores • New sources of other income will be the capital outlay falls and the battery Sub-Regional Sub-Regional 3% Non-Retail 12% Non-Retail identified as the retail landscape changes. technology improves. Solar cells can Will shopping centre owners invest in now be produced with inkjet printers 65% Other Retail 65% Other Retail fleets of driverless cars to ferry shopping which dramatically reduces the cost of centre patrons to and from their assets? production and allows them to be placed almost anywhere. We note however, • Bowling alleys and games arcades will that these printable cells are not yet undergo a massive resurgence as the commercially viable as they are less experience economy grows. efficient than traditional silicon cells Source: PCA, Urbis, Colliers International Valuation and have a very limited life span.

Debt Advisory: Demystifying ‘alternative lenders’ Simply put, we consider the ‘alternative lender’ to be a financier other than the major banks. The emergence of alternative They can include: lenders in Austraia's evolving • Non-major banks – domestic and offshore • Syndicators • Investment banks – domestic and offshore • Family offices real estate debt landscape • Domestic superannuation funds • Fixed income specialists • Offshore pension and sovereign • Hedge funds wealth funds The retreat of Australia’s major banks (including subsidiaries) from real • Debt funds estate lending has been a trending theme of the last three or so years. In dollar terms, the major banks’ aggregate exposure to the commercial These groups are actively and successfully taking up market share and addressing some of the major funding gaps in the Australian commercial real estate lending market. real estate market has not grown materially since Q3 2016*, with a consequential reduction in market share to circa 78 per cent* (as at June 2018) from a peak of around 87 per cent* (June 2013). ALTERNATIVE GAP MAJOR BANKS LENDERS Driven by regulation (Basel III, APRA) When it comes to retail more specifically, and the increasing scrutiny of the traditional banks are clearly taking note of Seven to nine years banks via the Financial Services Royal the reported macro headwinds affecting the achievable, with longer Commission, with 61 per cent of 10,140 sector. This is driving limited appetite and Loan duration funding Three to five years maximum tenors able to be structured submissions relating to the banking industry a reducing capacity to fund retail property against long leases to (Commonwealth Government), it is fair to and clients that do not ‘tick all the boxes’. strong tenants assume that recent changes in risk appetite, However, alternative lenders are most pricing and credit policies are here to stay. certainly open for business. Many of these Loan-to-value ratios (LVR) 45 per cent to 55 per cent Up to 70 per cent funders are relatively recent entrants to the Australian commercial real estate debt market – they are in their growth phase, Conservative funding Appetite with varying assessing and setting loan metrics for all available to select (existing) degrees of flexibility, Development funding opportunities based on merit. clients with substantial tenant with each transaction pre-commitments required assessed on merits

Appetite, with each Unsecured or Limited, if any, appetite transaction assessed ‘HeadCo’ funding on merit

*Major bank (and subsidiaries) share of the total commercial real estate debt market based on loans advanced by Australian Deposit-taking Institutions only. Does not include non-bank lenders.

Source: APRA and Colliers International

In general, the all-in cost of However, in the last month, With a focus on understanding the true Whilst the Australian real estate debt alternative debt appears higher the curve has inverted over the real estate fundamentals of their property market is clearly in a state of transition, than traditional senior debt medium-term, with short-term security, funders are spending significant borrowers with thorough, well-informed loans. However, in our view, the rates rising above medium-term time and effort looking through the headline strategies, supportable metrics and a increasing number of alternative rates, indicating that the market is numbers. Areas of focus include: willingness to adapt within an evolving lenders in the Australian pricing in a rate cut. With the three • Sponsor expertise retail environment are best positioned to commercial real estate debt month bank bill rate – over which • Repositioning opportunities/alternative capture the interest and most importantly, market is putting downward many variable loans are funded – asset strategies to attract foot traffic the funding, of active lenders. pressure on pricing, with higher than the one, two, three and • Lease structures alternative finance continuing to four-year swaps, it may be a good • 10 year cash flow prove accretive to equity on a total time for borrowers to consider • Purposeful and efficient design return basis. That said, there are their interest rate hedging • Competitive set, catchments some groups capable of competing positions. Presently, the four-year and demographics head-to-head with the major swap rate is approximately on par • MAT and demand drivers banks when it comes to price. with the three-month bank bill rate suggesting it may be a good time It should be noted that volatility is for borrowers to consider their currently a key feature of financial interest rage hedging positions. Swap Curve One Month – Four Years markets. Generally, the interest AS AT JANUARY 2019 rate curve is considered normal Finally, it’s important to ensure % Rate when short-term rates are lower that the cost of debt isn’t the sole 2.25 than longer-term rates, giving measure of competitiveness or the curve an upward trajectory suitability. The impacts of key 2.20 and suggesting rates are likely to covenants and conditions – increase over time. for example, LVR and ICR 2.15 headroom, margin maintenance, 2.10 early repayment penalties – need to be tested to ensure the 2.05 funding package is robust and supportive of the borrower’s 2.00 strategy, in addition to being 1.95 accretive to equity. 1.90

1.85

1.80 Debt 1.0 2.0 3.0 4.0 5.0 Advisory Years Source: Colliers International, ASX, Thomson Reuters

Australian 2018 Retail Transaction List TRANSACTIONS > $10 MILLION ($AUD)

CBD

PROPERTY NAME SUBURB STATE GLAR M2 SALE PRICE STAKE TRANSACTION DATE $SPM2 CAP RATE (%) PURCHASER VENDOR

King Street Wharf (retail component)1 Sydney NSW 5,651 $125,500,000 100% Dec-18 $22,208 6.03% Markham LaSalle Investment Management

York & George (mixed use)2 Sydney NSW 7,709 $200,000,000 75% Apr-18 $34,592 Undisclosed PGIM Real Estate Fife Capital

Soul Pattinson Building Sydney NSW 1,251 $95,000,000 100% Mar-18 $75,939 4.00% Kingvest Pty Ltd Washington H Soul Pattinson and company

60 Queen Street3 Brisbane QLD 3,109 $95,000,000 100% Jul-18 $30,556 Undisclosed Charter Hall REIT 151 Property

Soul Boardwalk Surfers Paradise QLD 7,012 $90,000,000 100% Jun-18 $12,835 7.89%* Galaxy Entertainment Group PwC (Reciever)

Bvlgari Flagship Store (Strata) Sydney NSW 950 $58,600,000 100% Nov-18 $61,684 4.75% Deka Immobilien Allegra European Holdings

274-278 Bourke Street Melbourne VIC 950 $47,000,000 100% Jul-18 $49,474 3.90% Austpen Investments Pty Ltd Elbaum Holdings

Festival Towers (retail component) Brisbane QLD 1,047 $32,000,000 100% Aug-18 $30,564 4.98%* Charter Hall Direct Retail Fund Marquette Properties

One Dixon Sydney NSW 2,534 $23,990,000 100% Aug-18 $9,467 5.33% Private Investor Lian Huat Group

620 Collins Street (retail component) Melbourne VIC 639 $21,550,000 100% Nov-18 $33,725 4.13% Private Investor Private Investor

Victoria One (retail component)4 Melbourne VIC 500 $13,615,000 100% Nov-18 $27,230 5.50% Private Investor Golden Age Group

189-191 Bourke Street Melbourne VIC 490 $13,000,000 100% Oct-18 $26,531 2.71% Undisclosed Le & James Pty Ltd

179 Church Street Parramatta NSW 368 $11,000,000 100% Jun-18 $29,891 3.80% Jade Enterprise (Australia) Pty Ltd Y.L. Pty Ltd

TOTAL $826,255,000

Regional

PROPERTY NAME SUBURB STATE GLAR M2 SALE PRICE STAKE TRANSACTION DATE $SPM2 CAP RATE (%) PURCHASER VENDOR Hoppers Crossing Pacific Portfolio VIC 194,412 $1,000,000,0005 50% Feb-18 $10,287 Confidential Queensland Investment Corporation Confidential & Epping

Westfield Eastgardens Pagewood NSW 82,650 $720,000,000 50% Jul-18 $17,423 4.25% Scentre Group Terrace Tower Group

Grand Plaza Shopping Centre Browns Plains QLD 51,849 $215,000,000 50% Apr-18 $8,293 5.50% Invesco Real Estate Vicinity Retail Partnership (VRP)

TOTAL $1,935,000,000

¹ 99-year leasehold ² The total consideration of this deal was $200 million for a 75 per cent interest in the retail (4,946 square metres) and commercial office space (2,763 square metres) components. 3 Estimated Pricing – Sold in one line as part of the No.1 Brisbane Street sale totaling $95,500,000 4 Sale reflects five Strata lots sold in one line 5 Approximate sale price only * Core market yield

Australian 2018 Retail Transaction List TRANSACTIONS > $10 MILLION ($AUD) Sub-Regional

PROPERTY NAME SUBURB STATE GLAR M2 SALE PRICE STAKE TRANSACTION DATE $SPM2 CAP RATE (%) PURCHASER VENDOR

Figtree Grove Wollongong NSW 21,945 $206,000,000 100% Dec-18 $9,387 6.00% SPH REIT JV Moelis Blackstone

Burwood One Burwood East VIC 26,598 $181,500,000 100% Oct-18 $6,824 5.27%* Private Investor Private Investor

Waverley Gardens Shopping Centre Mulgrave VIC 39,554 $178,000,000 100% Nov-18 $4,500 Undisclosed Elanor Investors/Heitman Blackstone

Marrickville Metro Marrickville NSW 22,899 $160,000,000 50% May-18 $13,974 4.75% UniSuper AMP Capital (ADP)

Lidcombe Centre Lidcombe NSW 32,911 $145,000,000 100% Oct-18 $4,406 6.50% Lidcombe Property Holding Vicinity Centres (VERF)

Vicinity Centres Brandon Park Shopping Centre Wheelers Hill VIC 23,043 $135,000,000 100% Apr-18 $5,859 6.33%* Newmark Capital and Testra Super Charter Hall Retail REIT & Gateway Plaza Leopold Leopold VIC 33,510 $117,000,000 100% Jun-18 $3,491 6.50%* Vicinity Centres (VERF) Charter Hall Prime Retail Fund (CPRF)

Keilor Central Shopping Centre Keilor Downs VIC 20,087 $113,000,000 100% Dec-18 $5,626 6.00%* Fort Street Real Estate Capital Fund IV Vicinity Centres (VERF)

Ashfield Mall6 Ashfield NSW 24,853 $102,300,000 50% Jul-18 $8,232 5.50%* ISPT (Core Fund) Abacus Property Group

Warnbro Centre Warnbro WA 21,401 $92,900,000 100% Oct-18 $4,341 8.16% SCA Property Group Vicinity Centres

Stockland Bathurst Bathurst NSW 19,446 $90,000,000 100% Nov-18 $4,628 7.25% Moelis & Company Stockland

Salamander Bay Square Salamander Bay NSW 24,000 $83,100,000 47.5% Aug-18 $7,289 5.75% Charter Hall Prime Retail Fund Charter Hall Retail REIT

Campbellfield Plaza Campbellfield VIC 17,900 $74,000,000 100% Dec-18 $4,134 6.50% Charter Hall REIT ISPT

Sturt Mall Wagga Wagga NSW 15,250 $73,000,000 100% Aug-18 $4,787 6.48%* SCA Property Group DEXUS Property Group

West End Plaza Albury NSW 15,934 $66,000,000 100% Oct-18 $4,142 7.38% SCA Property Group Vicinity Centres

The Village Bacchus Marsh Bacchus Marsh VIC 16,075 $61,650,000 100% Apr-18 $3,835 7.02%* Colin De Lutis Abacus Property Group

Belmont Village Belmont VIC 14,032 $58,000,000 100% Oct-18 $4,133 5.23% Private Investor Vicinity Centres

Lavington Square Lavington NSW 20,467 $52,000,000 100% Oct-18 $2,541 9.53% SCA Property Group Vicinity Centres

Market Square Wilsonton Toowoomba QLD 18,500 $51,500,000 100% Jul-18 $2,784 5.92% CVS Lane, Consolidated Properties Engage Capital

Churchill Centre Churchill Centre North Kilburn SA 24,321 $42,500,000 50% Mar-18 $3,495 6.00% Axiom North Investment Trust 1

TOTAL $2,082,450,000

6 Sold as part of a portfolio with Lutwyche Shopping Centre * Core market yield

Australian 2018 Retail Transaction List TRANSACTIONS > $10 MILLION ($AUD) Neigbourhood

PROPERTY NAME SUBURB STATE GLAR M2 SALE PRICE STAKE TRANSACTION DATE $SPM2 CAP RATE (%) PURCHASER VENDOR

Hurstville Central7 Hurstville NSW 6,239 $119,500,000 100% Jul-18 $19,154 6.07% Undisclosed Cerno Real Estate Investors & Ashe Morgan

Currambine Central Currambine WA 17,056 $91,000,000 100% Oct-18 $5,335 7.48% SCA Property Group Vicinity Centres

Wallsend Shopping Centre Wallsend NSW 12,009 $81,000,000 100% Jul-18 $6,745 6.60% Haben Stockland

Bentons Square Mornington Peninsula VIC 10,023 $77,000,000 100% Oct-18 $7,682 6.71% SCA Property Group Vicinity Centres

Coomera Square Upper Coomera QLD 9,115 $58,500,000 100% Nov-18 $6,418 7.15% Real Asset Management (RAM) Charter Hall Retail REIT

Lutwyche City Shopping Centre Brisbane QLD 18,883 $53,000,000 50% Jul-18 $5,614 6.00% ISPT Abacus Property Group

The Gateway Langwarrin VIC 10,865 $50,000,000 100% Oct-18 $4,602 6.49% SCA Property Group Vicinity Centres

Cranebrook Village Shopping Centre Cranebrook NSW 6,633 $48,100,000 100% Dec-18 $7,252 5.25%* Auspacific Property Group Cranebrook Village Pty Limited

Aurora Village Shopping Centre Epping VIC 8,284 $44,500,000 100% Dec-18 $5,372 5.60% Private Investor Coles Group Property Developments Ltd

Stirlings Central Geraldton WA 8,532 $44,000,000 100% Oct-18 $5,157 7.97% SCA Property Group Vicinity Centres

Thornleigh Marketplace Thornleigh NSW 7,037 $43,100,000 100% May-18 $6,125 5.30%* Private Investor Charter Hall Retail REIT

Stockland Highlands Shopping Centre Craigieburn VIC 7,770 $43,000,000 100% Apr-18 $5,534 5.49%* Private Investor Stockland

Hope Island Shopping Centre Hope Island QLD 9,521 $42,848,000 100% Feb-18 $4,500 10.29% Argus (HIC) ATF Hope Isalnd Fund Undisclosed

Kalamuda Central Kalamuda WA 8,364 $41,500,000 100% Oct-18 $4,962 6.93% SCA Property Group Vicinity Centres

Mordialloc Plaza Mordialloc VIC 4,526 $41,000,000 100% May-18 $9,059 4.33%* Woolworths Group Ltd Private Offshore Investor

Flinders Square Yokine WA 6,051 $39,500,000 100% Aug-18 $6,528 6.10% APIL Vicinity Centres

Australind Village Shopping Centre Australind WA 9,321 $39,430,000 100% Oct-18 $4,230 8.30% Australind Trust Vukelic Group

Mornington Village Shopping Centre Mornington Peninsula VIC 7,963 $39,380,000 100% May-18 $4,945 5.52%* Private Offshore Syndicate Private Investor

Nundah Village Nundah QLD 5,204 $36,600,000 100% Jun-18 $7,033 5.69% ISPT Undisclosed

Bellarine Village Newcomb VIC 10,442 $36,500,000 100% May-18 $3,495 5.67% Private Investor Private Investor

Easy T Shopping Centre Robina QLD 5,880 $35,800,000 100% Apr-18 $6,088 7.18% V Avenue Holdings Westlawn Property Trust (Clarence Property) Primewest Diversified Income Trust Yamanto Shopping Village Yamanto QLD 12,518 $35,250,000 100% Dec-18 $2,816 7.05% Shayher Investments NO 3 Torquay Village Torquay VIC 6,780 $35,000,000 100% Jan-18 $5,162 6.25%* Private Investor Coles Group Property Developments Ltd

7 Leasehold property transacting with 42 years remaining * Core market yield

Australian 2018 Retail Transaction List TRANSACTIONS > $10 MILLION ($AUD) Neigbourhood – continued

PROPERTY NAME SUBURB STATE GLAR M2 SALE PRICE STAKE TRANSACTION DATE $SPM2 CAP RATE (%) PURCHASER VENDOR

Oxenford Village Oxenford QLD 5,815 $32,500,000 100% Oct-18 $5,589 6.70% SCA Property Group Vicinity Centres

Miami One Shopping Centre Miami QLD 4,657 $31,887,000 100% Oct-18 $6,847 6.40% SCA Property Group HamBros Property Group Kin Ming Eddy Tse and St Ives Shopping Centre Goodna QLD 11,326 $30,450,000 100% Mar-18 $2,689 9.50% Mintus Properties Shui On Tse Goldfields Plaza Gympie QLD 7,609 $27,500,000 100% Jun-18 $3,614 7.57%* Lascorp Development Group Vicinity Centres (VCX)

Woolworths Aveley Aveley WA 5,040 $26,925,000 100% Sep-18 $5,342 5.81% Private Investor Woolworths Group Limited

North Shore Village Pacific Paradise QLD 4,076 $26,100,000 100% Oct-18 $6,403 6.15% SCA Property Group Vicinity Centres

Morningside Plaza Shopping Centre Morningside QLD 4,431 $23,800,000 100% Mar-18 $5,371 5.10% Private Investor Lascorp Development Group

Marketplace Deagon Deagon QLD 2,374 $23,300,000 100% Jan-18 $9,815 7.17% Private Investor Bourse and Baradel Investments

Stockland Caloundra (South) Caloundra QLD 4,760 $23,080,000 100% Nov-18 $4,849 5.50% Undisclosed Stockland

Windsor Marketplace Windsor NSW 5,347 $22,600,000 100% Nov-18 $4,227 6.67% Private Investor Centuria Capital

Gabba Central Woolloongabba QLD 4,215 $22,385,000 100% Jul-18 $5,311 6.51%* Private Investor Undisclosed

Summer Centre Orange Orange NSW 5,080 $22,000,000 100% Feb-18 $4,331 7.27%* Paul Saunders & Bill Gravanis Undisclosed

Kallangur Fair Shopping Centre Kallangur QLD 4,703 $21,380,000 100% Aug-18 $4,546 6.50% Private Investor Charter Hall Retail REIT

Coles Westmead Westmead NSW 4,616 $21,000,000 100% Sep-18 $4,549 6.49%* Private Investor Coles Group Property Developments Ltd

Kelmscott Plaza Kelmscott WA 5,077 $19,000,000 100% Feb-18 $3,742 6.70% Amazon Investments Australia Pacific Kelmscott Pty Ltd

Maroondah Village Shopping Centre Croydon North VIC 3,103 $18,800,000 100% May-18 $6,059 5.23%* Private Investor Undisclosed

Shoalwater Shopping Centre Rockingham WA 4,700 $16,500,000 100% Jan-18 $3,511 7.22% Mustera Property Property Bank Australia/SCC

Ferny Grove Shopping Village Ferny Grove QLD 4,408 $16,200,000 100% Apr-18 $3,675 6.93%* Kerching Capital Undisclosed

Moama Marketplace Moama NSW 4,514 $14,000,000 100% Jun-18 $3,101 7.00%* SCA Unlisted Retail Fund RE Ltd SCA Property Group

Cooloola Cove Shopping Centre Cooloola Cove QLD 4,300 $12,850,000 100% Mar-18 $2,988 7.69% Altor Capital Undisclosed

Pearsall Shopping Centre Pearsall WA 2,668 $12,500,000 100% Feb-18 $4,685 6.32% Platinum28 Pte Ltd Ranjan Rajnikant Sheth

Greenacres Shopping Centre Greenacres SA 7,597 $11,174,000 100% Apr-18 $1,471 7.25% PPI Funds Management Graham Investments

The Hub Westlake Westlake QLD 4,848 $10,500,000 100% May-18 $2,166 7.13% Real Asset Management (RAM) A&P Property Holdings

TOTAL $1,661,939,000

* Core market yield

Australian 2018 Retail Transaction List TRANSACTIONS > $10 MILLION ($AUD) Large Format Retail/Outlet Centres

PROPERTY NAME SUBURB STATE GLAR M2 SALE PRICE STAKE TRANSACTION DATE $SPM2 CAP RATE (%) PURCHASER VENDOR Australian Prime Property Fund Harbour Town Gold Coast8 Biggera Waters QLD 55,225 $180,000,000 25% Oct-18 $13,038 4.75% Future Fund (Retail) (Lendlease) Homemaker The Valley Fortitude Valley QLD 38,185 $166,220,000 100% Sep-18 $4,353 6.71% Arkadia Altis (First State Super)

Greenway Plaza and Supacenta Wetherill Park NSW 29,177 $112,400,000 100% Sep-18 $3,852 7.64% Aventus Property Group Altis (First State Super)

The GPT Group (16.67%) & The GPT Highpoint Homemaker Centre Maribyrnong VIC 21,268 $80,500,000 100% Nov-18 $3,785 6.20% Private Investor Wholesale Shopping Centre Fund (83.33%)

Bunnings Underwood Underwood QLD 18,636 $53,524,000 100% Apr-18 $2,872 5.25%* CBRE Global Investors Bunnings Properties Pty Ltd

Bunnings Port Macquarie Port Macquarie NSW 18,318 $44,650,000 100% Sep-18 $2,437 5.64% MPG Funds Management Confidential

Bunnings Acacia Ridge Acacia Ridge QLD 15,828 $44,650,000 100% Oct-18 $2,821 5.25%* Charter Hall REIT Bunnings Properties Pty Ltd

Bunnings Toowoomba Glenvale QLD 17,830 $41,402,000 100% Oct-18 $2,322 5.35%* Charter Hall REIT Bunnings Properties Pty Ltd

Malaga Large Format Retail Centre Malaga WA 18,925 $39,998,000 100% Feb-18 $2,114 8.37% Quadrant Investments Private Investor

Red Hill Homemaker Centre Rockhampton QLD 16,275 $38,000,000 100% Jul-18 $2,335 8.09%* Primewest Diversified Income Trust NO 3 Arkadia Property Group Westlawn Property Trust The Zone Underwood Underwood QLD 11,000 $31,250,000 100% May-18 $2,841 7.50%* Baycrown (Clarence Property) 283-285 Burwood Road Hawthorn VIC 4,427 $25,000,000 100% Sep-18 $5,647 3.15% Hawthorn Developments Pty Ltd LYZ Property Group

ShopSmart Outlet Centre8 Sydney NSW 9,990 $24,780,000 100% Jun-18 $2,480 6.77%* Spotlight Group Angaet Holdings

Gawler Park Homemaker Centre Gawler SA 13,063 $24,500,000 100% Sep-18 $1,876 Undisclosed Revelop Private Investor Australasian Property Freedom Lifestyle Centre Capalaba QLD 5,714 $24,175,000 100% Jul-18 $4,231 6.80%* Daluda Properties Investments Ltd (APIL) Heatherbrae Homemaker Centre Heatherbrae NSW 17,181 $23,300,000 100% Oct-18 $1,356 7.94% Sentinel Property Group Heatherbrae Investment Holdings Pty Ltd

North Lakes Lifestyle Centre North Lakes QLD 7,971 $21,500,000 100% Nov-18 $2,697 8.00% Exceed Capital NL Property Trust Undisclosed Charter Hall Direct Diversified Derwent Park Road Derwent Park TAS 6,453 $15,500,000 100% Dec-18 $2,402 8.00% Undisclosed Consumer Staples Fund Bunnings Glenorchy Glenorchy TAS 16,900 $14,060,000 100% Dec-18 $832 3.13% Undisclosed The Royal Agricultural Society of Tasmania

Centrepoint Toowoomba Toowoomba QLD 7,353 $13,750,000 100% Sep-18 $1,870 7.92%* Arcana Capital Private Investor

154-166 Maroondah Highway Ringwood VIC 5,021 $11,130,000 100% Sep-18 $2,217 6.70% Lakewood Management Denbury Nominees Pty Ltd

TOTAL $1,030,289,000

8 Outlet Centre * Core market yield

Australian 2018 Retail Transaction List TRANSACTIONS > $10 MILLION ($AUD) Freestanding

PROPERTY NAME SUBURB STATE GLAR M2 SALE PRICE STAKE TRANSACTION DATE $SPM2 CAP RATE (%) PURCHASER VENDOR Lisarow & Woolworths Portfolio9 NSW 8,339 $45,700,000 100% Jul-18 $5,480 5.70% Private Investors Woolworths Group Limited Nelson Bay

Coles Coffs Harbour Coffs Harbour NSW 4,110 $34,000,000 100% Jan-18 $8,273 5.54% Canzon Pty Ltd Private Investor

Coles Riverton Riverton WA 5,759 $31,950,000 100% Mar-18 $5,548 5.29% Private Investor Coles Group Property Developments Ltd

Coles Alderley Alderley QLD 4,410 $30,200,000 100% Sep-18 $6,848 5.29% Private Investor Coles Group Property Developments Ltd

Coles Earlwood Earlwood NSW 2,675 $28,720,000 100% May-18 $10,736 4.20% Private Investor Charter Hall Retail REIT

Woolworths Ermington Ermington NSW 1,894 $26,250,000 100% Nov-18 $13,860 Confidential Private Investor Private Investor

Coles Bowral Bowral NSW 4,821 $26,000,000 100% Jun-18 $5,393 5.19% Private Investor Coles Group Property Developments Ltd

Coles Sippy Downs Sippy Downs QLD 3,915 $24,000,000 100% May-18 $6,130 5.23% Private Investor Coles Group Property Developments Ltd

Woolworths Mossman Mossman QLD 3,947 $23,750,000 100% Sep-18 $6,017 5.96%* Private Investor Lynden Investments Group Pty Ltd

Coles Hamilton Hamilton VIC 3,870 $23,000,000 100% Dec-18 $5,943 5.20% Private Investor Private Investor

Woolworths Burwood East East Burwood VIC 3,400 $18,170,000 100% Aug-18 $5,344 4.58% Private Investor Private Investor

Woolworths Young Young NSW 3,139 $17,600,000 100% Nov-18 $5,607 6.44% Private Investor Charter Hall Retail REIT

Coles Clayton Clayton VIC 2,883 $17,115,000 100% Mar-18 $5,937 2.57% Private Investor Heugel Pty Ltd

Warrnambool Target Warrnambool VIC 6,983 $16,000,000 100% Jun-18 $2,291 8.25%* SCA Unlisted Retail Fund RE Ltd SCA Property Group

Woolworths Swansea Swansea NSW 3,677 $15,300,000 100% Jun-18 $4,161 6.00%* SCA Unlisted Retail Fund RE Ltd SCA Property Group

Woolworths Scoresby Scoresby VIC 2,900 $15,120,000 100% Aug-18 $5,214 4.54% Private Investor Private Investor

Adairs Richmond Richmond VIC 1,135 $14,810,000 100% Sep-18 $13,048 2.90% Undisclosed Private Investor

20-22 Overton Road Frankston VIC 2,800 $13,250,000 100% Sep-18 $4,732 5.71% Undisclosed Undisclosed

Woolworths Woodford Woodford QLD 3,668 $12,600,000 100% Jun-18 $3,435 6.25%* SCA Unlisted Retail Fund RE Ltd SCA Property Group

Woolworths Hadfield Hadfield VIC 2,101 $11,750,000 100% Jun-18 $5,593 3.57% Private Investor Westrent Properties Pty Ltd

Officeworks Hobart Hobart TAS 2,785 $11,725,000 100% Nov-18 $4,210 6.87% Undisclosed Undisclosed

TOTAL $457,010,000

OVERALL TOTAL10 $8,245,998,000

* Core market yield 9 Blended Yield 10 Overall total includes Other Retail sub category ($253,055,000)

New Zealand 2018 Retail Transaction List TRANSACTIONS > $10 MILLION ($NZD) Sub-Regional

CENTRE SUBURB STATE SALE DATE STAKE GLAR SALE PRICE INITIAL YIELD $SP/M² VENDOR PURCHASER

North City Shopping Centre, 2 Titahu Bay Road Porirua Wellington Apr-18 100% 25,403 $100,000,000 Undisclosed $3,937 Kiwi Property Group Angaet Holdings

South City Shopping Centre, 551 Colombo Street Christchurch Central Christchurch Apr-18 100% 18,322 $46,000,000 Undisclosed $2,511 South City Holdings Limited Private Investor

Highbury Shopping Centre, Birkenhead Auckland Feb-18 100% 13,941 $40,000,000 7.16% $2,869 NZRPG The Strand Trust 1 Cnr Highbury Bypass and Birkenhead Avenue

TOTAL $186,000,000

Large Format Retail/Outlet Centres

CENTRE SUBURB STATE SALE DATE STAKE GLAR SALE PRICE INITIAL YIELD $SP/M² VENDOR PURCHASER

7 Wagener Place Mount Albert Auckland Feb-18 100% 7,226 $31,000,000 Undisclosed $4,290 Argosy Property Wagener Place Centre Limited

96 Cuba Street Te Aro Wellington Feb-18 100% 10,520 $22,275,000 Undisclosed $2,117 Private Vendor Private Investor

Countdown Hornby, 17 Chappie Place Hornby Christchurch Mar-18 100% 4,200 $21,500,000 6.26% $5,119 Investore Private Investor

620 Karamu Road North Akina Hastings Jul-18 100% 6,727 $17,560,000 6.53% $2,610 Berkdale Properties Lp Pdl Properties Limited

87-101 Lunn Avenue Mt Wellington Auckland May-18 100% 10,380 $12,300,000 Undisclosed $1,185 The Warehouse Group Local Investor

74 Newton Road Eden Terrace Auckland Mar-18 100% 3,451 $12,100,000 Undisclosed $3,506 Private Vendor Private Investor

253 Edmonton Road Edmonton Auckland Jun-18 100% 2,680 $12,000,000 Undisclosed $4,478 Foodstore Properties (Te Atatu) Limited General Distributors Limited

Fresh Choice Supermarket, 64 Gorge Road Queenstown Queenstown Jan-18 100% 1,790 $11,100,000 4.80% $6,201 Investore Wrightwild Investments Limited

20 Carlyle Street Napier South Napier May-18 100% 3,788 $10,000,000 Undisclosed $2,640 C & C Trustees Limited Florian Properties Limited

TOTAL $149,835,000

New Zealand 2018 Retail Transaction List TRANSACTIONS > $10 MILLION ($NZD) Hardware

CENTRE SUBURB STATE SALE DATE STAKE GLAR SALE PRICE INITIAL YIELD $SP/M² VENDOR PURCHASER

3 Bunnings Stores Various Locations Various Locations Feb-18 100% 40,433 $78,500,000 6.13% $1,941 Stride Property Investore

Mitre 10, 5 Astley Avenue New Lynn Auckland Jun-18 100% 8,939 $29,371,000 5.25% $3,286 Agincourt Holdings Ltd Cook Property Ltd

Bunnings Hamilton South, 13 Quentin Drive Hamilton Lake Hamilton Jan-18 100% 11,645 $25,100,000 5.39% $2,155 Bunnings Limited Local Private

Placemakers, 102 Ostend Road Ostend Auckland Jan-18 100% 7,503 $16,525,000 Undisclosed $2,202 Private Vendor Private Investor

TOTAL $149,496,000

Freestanding

CENTRE SUBURB STATE SALE DATE STAKE GLAR SALE PRICE INITIAL YIELD $SP/M² VENDOR PURCHASER

180-182 Broadway Newmarket Auckland Jun-18 100% 2,062 $11,500,000 6.60% $5,577 Broadway 182 Limited Private Investor

157-171 Parnell Road Parnell Auckland May-18 100% 1,177 $10,900,000 5.39% $9,261 Westir Property Partnership Private Family Trust

Dominion Foundation 66 Cambridge Terrace Te Aro Wellington May-18 100% 1,746 $10,300,000 Undisclosed $5,899 66 Cambridge Terrace Limited Property Fund Limited

Caltex Petrol Station, 73-77 Paul Matthews Road Rosedale Auckland May-18 100% 560 $10,180,000 Undisclosed $18,179 Caltex New Zealand Limited Her Majesty the Queen

TOTAL $42,880,000

OVERALL TOTAL $528,211,000

Authors

LACHLAN MACGILLIVRAY AMY VANEZI Head of Retail Investment Analyst Services Australia Retail Investment Services +61 413 053 919 +61 432 278 216 [email protected] [email protected]

ALEX PHAM NICK CAVENAGH Director Analyst Research Retail Investment Services +61 433 779 984 +61 458 626 756 [email protected] [email protected]

ANDREW JOHNSTON BROOKE CONLON Head of Retail, Valuations Director & Advisory Services Debt Advisory, Capital Markets +61 410 533 320 +61 2 9249 2057 [email protected] [email protected]

MATT GUBBAY CHRIS DIBBLE Associate Director Director Retail Investment Services Research & Communications +61 424 182 149 +64 21 242 9447 [email protected] [email protected]

Team Australia New Zealand

LACHLAN MACGILLIVRAY BEN TANA ALEX PHAM RICHARD KIRKE Head of Retail Investment Director, WA Director International Sales Director Services Australia Retail Investment Services Research Capital Markets +61 413 053 919 +61 434 659 807 +61 433 779 984 +64 21 299 3120 [email protected] [email protected] [email protected] [email protected]

JAMES WILSON MATT GUBBAY ADRIANNA KAZZI CHRIS DIBBLE National Director, NSW Associate Director Database Analyst Director Retail Investment Services Retail Investment Services Research Research & Communications +61 402 079 304 +61 424 182 149 +61 451 103 375 +64 21 242 9447 [email protected] [email protected] [email protected] [email protected]

STEWART GILCHRIST AMY VANEZI ANDREW JOHNSTON National Director, QLD Analyst Head of Retail, Valuations Retail Investment Services Retail Investment Services & Advisory Services +61 439 034 042 +61 432 278 216 +61 410 533 320 [email protected] [email protected] [email protected]

NICK CAVENAGH TIM DU TEMPLE TIM MCINTOSH Analyst Retail National Director Director, VIC Investment Services Debt Advisory, Capital Markets Retail Invetsment Services +61 458 626 756 +61 2 9017 6958 [email protected] [email protected] [email protected]

Colliers International does not give any warranty in relation to the accuracy of the information ALEX JAMES-ELLIOTT DANIKA CRAWFORD BROOKE CONLON contained in this report. If you intend to rely upon the information contained herein, you must Executive, NSW Marketing Manager Director take note that the information, figures and projections have been provided by various sources Retail Investment Services Retail Investment Services Debt Advisory, Capital Markets and have not been verified by us. We have no belief one-way or the other in relation to the accuracy of such information, figures and projections. Colliers International will not be liable for +61 407 651 373 +61 423 291 774 +61 2 9249 2057 any loss or damage resulting from any statement, figure, calculation or any other information [email protected] [email protected] [email protected] that you rely upon that is contained in the material.