Briefing National Retail February 2018
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Savills Research Australia Briefing National Retail February 2018 Report Contents Executive Summary 2 Key Market Indicators 4 Retail Trade 6 Regional/Sub-Regional Centres 8 Neighbourhood Centres 10 Large Format Retail 11 NSW 12 VIC 14 QLD 16 WA 18 SA 20 Outlook 2018 22 Key 2017 Transactions 23 Key Contacts 26 Savills Research | Briefing National Retail Associate Director – Research Katy Dean [email protected] Senior Analyst– Research For our latest national reports, visit savills.com.au/research Peter Sutherland To join Savills Research mailing list, please email [email protected] [email protected] Executive Summary Many of the key drivers that have underpinned the Although investment volumes in 2015 got close to $9 billion, performance of Australia’s retail property market since investment in 2017 ($5m+) outshines any level seen in the 2015 are unchanged. Debt remains affordable and last decade. Almost half of the total value invested was in populations continue to grow, particularly on the eastern the $200 million + segment, a trend which hasn’t been seen seaboard. The weight of capital targeting property and the since 2007. international search for yield has yet to lose any significant While large institutional funds and trusts, as well as foreign momentum, rather conditions are shifting globally and and private investors, have all played a part in the hunt for markets that were previously off the agenda for political yield in recent years, there has been a noticeable change in or economic reasons are now being considered again. strategy of net sellers in most markets to sell down non-core Global demand for retail assets is clearly evident with assets. This has created opportunity for investors actively Westfield Group announcing in December that it had struck seeking value-add retail assets and purchaser and vendor a deal to sell the company to European listed property profiles are beginning to shift. Further supporting this trend company, Unibail-Rodamco, for US$24.7 billion (AU$32.8bn). is the amount of capital that is currently being invested into After the deal is finalised, Unibail-Rodamco will emerge the redevelopment of major centres across the country. with control of 104 assets in 27 markets across the world, Broadly speaking, there are some challenges facing the with an estimated US$72.2 billion of gross market value. sector. The so called ‘Amazon effect’ is still playing out Australian retail property has been a major recipient of and the level of investor/developer confidence in the sector investment capital over the last three years; reflecting remains varied, particularly for discretionary retail. While significant pent-up demand on the back of not just non-discretionary retail appears to have less headwinds Australia’s safe haven status, but the sector itself within from online trade, all asset classes remain highly the commercial property market. Direct investment competitive and sought-after. Retail sales turnover over the three years to 2017 reached AU$25.6 billion, growth has also been choppy across the country, with up from AU$19 billion in the three years to 2014. a divergence developing between key retail categories as consumer shopping patterns continue evolving. While overall volumes appeared to moderate during the first half of 2017, the pace quickly recovered and the In this report, we look at the major retail sub-sectors across final quarter closed strongly as major assets came Australia’s main capital cities focusing on recent investment to market. Surpassing expectations, 2017 saw a total of sale volumes and development trends, as at December 2017. circa $9.17 billion invested across Australia over the year. State Summary Table Key State Indicators (%) Latest NSW VIC QLD WA SA ACT AUS SFD / GDP Growth Sep-17 3.1 (2.7) 4.2 (3.0) 3.0 (2.0) -4.2 (2.2) 3.6 (2.0) 3.0 (2.6) 2.2 (2.6) Population Growth Jun-17 1.6 (1.4) 2.3 (2.1) 1.6 (1.8) 0.8 (2.1) 0.6 (0.9) 1.7 (1.8) 1.6 (1.7) Employment Growth Nov-17 2.9 (1.6) 3.0 (2.1) 4.8 (1.4) 2.8 (1.6) 1.3 (0.7) 3.9 (1.6) 3.1 (1.6) Unemployment Rate Nov-17 4.8 (5.3) 5.9 (5.6) 6.1 (5.6) 6.0 (4.8) 6.3 (6.0) 4.0 (3.8) 5.6 (5.4) Inflation Sep-17 1.9 (2.5) 2.2 (2.3) 1.5 (2.4) 0.8 (2.1) 1.8 (2.3) 2.1 (2.2) 1.8 (2.4) Retail Turnover Growth Dec-17 2.6 (4.0) 4.3 (4.0) 0.4 (3.1) -0.1 (3.3) 4.9 (3.0) 1.5 (3.3) 2.4 (3.6) Source: ABS/Savills. Note: Annual Change shown, 10yr compound average shown in brackets. 02 February 2018 savills.com.au/research 03 Savills Research | Briefing National Retail Key Market Indicators “NSW and QLD front runners National Sales Activity as Australian retail transactions Following an investment sale surge in November and December, mostly in Queensland and New South Wales, ($5m+) reach a 10-year high.” 2017 can go on record as an extraordinary year. The total value of investment transactions ($5m+) signed in 2017 reached a 10-year high at $9.17 billion, up 23% on 2016 and well above the 10-year average of $5.7 billion. Almost half of the total value invested was in the $200 million+ segment, a trend not seen since 2007. Of the surveyed markets, New South Wales and Queensland were the headliners, recording significant rises in investment volumes on a year-on-year basis. Transactions in the Regional SC sector ($2.51bn) were largely responsible for the record- breaking year. The last time Regional sales volumes got close to this level was back in 2007 ($2.87bn). The Large Format sector was also a major standout, with sale volumes reaching Vendors its highest level in the past decade. National Transaction Profile Vendors v Purchasers National Sales Activity ($5m+) by State Purchasers $10bn NSW VIC QLD WA SA ACT $9bn Vendors $8bn 0% 20% 40% 60% 80% 100% $7bn Fund Trust Developer $6bn Owner Occupier Government Syndicate Foreign Investor Private Investor Other $5bn Purchasers $10bn $4bn NSW VIC QLD WA SA ACT $9bn $3bn $8bn $2bn 0% 20% 40% 60% 80% 100% $7bn $1bn Fund Trust Developer $6bn $0bn Owner Occupier Government Syndicate Foreign Investor Private Investor Other $5bn $4bn Source: Savills Research (Year to Dec-17) Source: Savills Research (Year to Dec-17) $3bn 04 $2bn $1bn $0bn February 2018 Savills ResearchSavills Research | Briefing | Briefing Note - NationalNote - National Retail Retail Q4/2017Q4/2017 NationalNational Retail Retail Supply Supply by Sector by Sector NationalNational Retail Retail Supply Supply by State by State NationalThe nationalThe nationalRetail supply supplySupplypipeline pipeline is byexpected Sectoris expected to gradually to gradually build buildNationally, NationalNationally, two main Retailtwo sectors main Supply sectors are driving areby drivingStatethe development the development over theover next the two next years two asyears new as Regional, new Regional, Neighbourhood Neighbourhood pipeline pipeline with Regional with Regional project sproject accountings accounting for 41% for of 41% total of total The national supply pipeline* is expected to gradually build Nationally, two main sectors are driving the development and Largeand LargeFormat Format retail stock retail isstock released is released and owners and owners re- andre- Largeand FormatLarge Format accounting accounting for 26.5%. for 26.5%. 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FreestandingNeighbourhoodFreestanding and Mixed-Use and projects Mixed-Use centres. account centres. for 14.5% and Sub- Regional 10.8%, with the balance occurring across CBD TraditionallyTraditionallyTraditionally RegionalRegional Regional centrecentre centre ownersowners owners have have attempted haveattempted attempted to to to Centres, Shops, Freestanding and Mixed-Use centres. boostboost market marketboost market share by byshare expandinexpanding by expanding existing existingg existing centres, centres, centres, however however however New SouthNew WalesSouth hasWales the has largest the largestsupply supplypipeline pipeline of all the of all the their collective strategy is increasingly becoming one of states surveyed, with a high proportion at DA stage. This is theirtheir collectivecollective strategy isis increasinglyincreasingly becoming becoming one one of of statesNew surveyed, South with Wales a high has prop theortion largest at DAsupply stage. pipeline This is of all the differentiationdifferentiation by creating by creating a customer a customer ‘experience’. ‘experience’. This is inThis isconsistent in consistent with healthy with healthy State Final State Demand Final Demand growth growthand high and high differentiation by creating a customer ‘experience’. This is in states surveyed, with a high proportion at DA stage. 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