Investors hungry for food-based retail

There will be strong demand for food-based neighbourhood shopping centres in 2012 from private investors, unlisted property trusts and syndicates, according to new research.

Demand for these commercial assets remained high in 2011, with many investors attracted to higher yields, stronger growth and reduced volatility experienced in the food-based retail sector.

Listed retail property trusts were the strongest performers in the A-REIT sector, following the completion of reporting season.

Investors were attracted to retail during 2011 due to it historically been less volatile than other commercial assets on both a capital growth and total returns basis.

“Retail was far and away the best performing sector as the risk premium increased much less than in the wider market as investors perceived the sector as a relatively safe haven,” says Knight Frank.

“Secondly the macro drivers of the office and industrial were much more dire, especially at the height of the downturn.”

However, even the recent downturn in retail sentiment and expectations of only modest growth in asset values over the next 12 months is not expected to deter investors due to retail diversification benefits and relatively low volatility.

Major listed retail landlords, wholesale funds and some super funds are expected to continue to inject capital into the sector for both “selective acquisitions” and “development/expansion opportunities”.

“There is the potential for many landlords with retail expertise and focus to see this point in the cycle as a counter-cyclical opportunity to acquire or upgrade/expand centres to capture the upturn in trading performance from mid-2012,” the report says.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


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