Australian retail continues to be a major player on the global real estate investment stage with the Financial Year Ending 2016 (FYE2016) period achieving record levels of capital flows driven by both domestic and offshore investors, according to the Retail Capital Markets Investment Review report from Colliers International.
Transaction volumes in excess of $10 million reached an all time high of $7.63 billion, exceeding the previous year's $7.514 billion and breaking the FYE2013 prior record of $7.627 billion. Against a backdrop of global political instability and deflationary threats, Australian retail property assets are becoming increasingly popular with foreign investors and this dynamic is becoming evident in the data, according to Colliers.
The report said the FYE2016 period revealed a distinct increase in foreign purchaser activity which comprised 31 per cent of all investment volumes, up from just 18 per cent in the FYE2015 period. The report lists a lower Australian dollar together with enviable economic growth are also acting as foreign investment catalysts for the sector.
Colliers said investor interest is often strongest within CBD and regional retail assets that enjoy high volumes of foot traffic in growth catchments however as the annualised data points suggest, these highly sought after assets come to market infrequently. In this vein, Colliers views sub regional centres as a compelling alternative for investors as they look to gain a foothold in the retail market.
While there is a greater spectrum of quality within the sub regional sector, there are higher levels of liquidity and investors may find opportunities to trade up, said the report.
"By this we mean invest capex in an offensive rather than defensive manner to increase overall GLA and future revenue streams. Nonetheless, CBD assets will always be highly sought after and FYE2016 presented investors with 11 assets coming to market making a 56 per cent gain on the prior year.
"As expected, these prime assets traded on tight yields reflecting access to robust trade areas, strong population growth and generating strong investor interest. In terms of key players, we note the high levels of activity generated by Blackstone with the institution being active as both buyer and seller over the FYE2016 period. Blackstone participated in the sale of six assets totalling $344 million, although it was far more active in purchasing.
"Over the period Blackstone acquired seven assets, including two portfolios totalling just over $1.5 billion. Looking ahead we expect the retail industry to be supported by lower for longer interest rates, improving business conditions and a strengthening labour market. Combined with a stable economy and enviable economic growth, we expect that Australian retail assets will continue to garner significant investor interest over the coming year," said the Colliers report.
Excerpt from Colliers International Retail Capital Markets Investment Review Report.