Retail Development Pipeline to Bottom Out


The number of new retail developments are forecast to drop dramatically over the next five years, improving existing asset valuations and soaking up oversupply.

CBRE’s forecast for retail shows new supply will start to fall in 2022 with asset valuations bottoming out this year.

Bunnings, Office Works, Harvey Norman and large format retail stores will continue outperforming other assets as the increase in new homes drives demand for building materials and household goods.

Meanwhile Australia’s largest listed retail asset owners are de-risking future mixed-use developments as they wait for valuations to rise.

Retail supply forecast

Retail Supply Forecast. Source: CBRE Australia Real Estate Market Outlook 2021 - Retail

^Source: CBRE Australia Real Estate Market Outlook 2021 - Retail

CBRE head of retail research Kate Bailey said retail is having softer yields compared to other sectors giving landlords the opportunity to reposition assets as the sector recovers.

“Changing patterns of consumer demand will drive opportunities for investors, landlords and occupiers alike,” Bailey said.

“Record growth in groceries and household goods sales drove investor demand for neighbourhood centres and large format retail.”

During the pandemic ASX-listed retail assets dropped in value significantly.

Vicinity Centres chief executive Grant Kelley said although their property valuations went down $572.4 million they were continuing to progress key mixed-use developments during the pandemic.

“We are focused on de-risking our projects prior to commencing construction,” Kelley said.

“Including gaining necessary development approvals, locking in appropriate pre-leasing, partnering with other property groups and phasing spend over different stages in line with market demand.”

This is led by the 11.4 hectare development at Bankstown Central in Sydney and billion-dollar Box Hill precinct plans in Melbourne.

There are also plans in progress for Chadstone, Victoria Gardens, Sunshine Marketplace and Bayside in Victoria and Chatswood Chase Sydney.

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