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 2 1 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year Retail Property Sales BY SECTOR 10 (Billion $AUD) 8 6 4 2 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 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 3 3 Australian Retail Investment Snapshot 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 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 4 4 National Share (BY VALUE) – ASSET CLASS 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 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 5 5 Investor Share PURCHASER TYPE BY VALUE 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 i 2 Offshore capital accounted for 21 per cent st e of total value or $1.76 billion worth of 1 retail assets. Overseas investors were 0 Dom 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 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 6 6 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