Brisbane retail sector strong with limited supply: HTW Retail

The Brisbane retail property sector has remained relatively stable throughout 2019 as firm yields continue to be achieved across asset types and price points with strong demand from investors for quality retail assets with strong income security, according to the latest retail report from valuation firm Herron Todd White.

They found, the recent interest rate cuts and the very poor returns from cash are however again putting downward pressure on property yields for good quality investments, despite an industry consensus in late 2018 and early 2019 that yields had bottomed.

The valuers said, "we are yet to see widespread evidence of further yield tightening but this is more a function of very limited levels of stock availability and lesser levels of sales activity."

"At the lower end of the market, the demand for good quality convenience and neighbourhood shopping centres remains strong with high levels of investor interest from private investors in particular."

"Such properties generally continue to trade in the six to seven per cent yield range"

More broadly, sub-regional, regional and major regional shopping centres continue to feel the squeeze as the traditionally high rental levels are in many instances not sustainable.

Whilst good centres are better at maintaining occupancy, for many centres this is being done on a reduced rental structure which has a direct flow through to values.

For secondary centres, the increasing levels of vacancies are becoming harder to hide.

The report authors noted, "much of this pain is still to be worked through and is likely to continue for some time."

"These pressures are impacting on the higher end investment markets where the sentiment for retail has softened considerably."

"Overall, we expect generally stable market conditions to continue for the lower tier retail markets into 2020 on the back of the low interest rate environment."

"In particular, there will continue to be strong interest in secure income producing properties with strong lease covenants, however many leasing markets are likely to remain difficult and there will be a heightened degree of volatility for both rentals and values for secondary assets," they concluded.