Retail investment in Australia at an all-time high: Colliers International

Unprecedented institutional investor demand has seen retail investment in Australia hit an all-time record high, according to new research from Colliers International.

In it latest Australian Retail Investment Review report, Colliers found that 142 major retail transactions took place in the 2013 financial year with a combined value of $7.62 billions.

The total value of transactions soared by 80% on the $4.244 billion recorded in 2011/12, while the volume of transactions jumped just as strongly, up by 71 per cent compared to the 83 recorded in the previous financial year.

Colliers research director Nora Farren told Property Observer driving that high transaction activity was offshore investors entering the Australian market either directly or through partnering arrangements.

Among some of those marquee offshore investments were US private equity group Blackstone buying a 50% of the Erina Shopping Centre for $397 million in May, along with Challenger, acting on behalf of a middle-east investor, which acquired a portfolio of six centres from Federation Centre for $602 million.

The lion's share of transactions occured in the regional and sub-regional markets.

“In the regional space we had seven years’ worth of supply come to the market, with 14 interests in regional centres transacting worth in excess of $4 billion, which is significantly greater than the average of two centres per year over the past three years, and was more than half the total investment in retail assets over the 2012/13 financial year",  said Colliers national director of retail investment services, Lachlan MacGillivray.

“Meanwhile there were 20 sales of sub-regional centres worth more than $1 billion, which was a 25 per cent increase on the previous financial year".

Equally strong was the demand for neighbourhood shopping centres, with 60 sales worth a total of $1.287 billion recorded. The bulky good sector registered 30 transactions - double the previous year.

Mr MacGillivary said regional shopping centre activity should return to more normalised historical levels over the coming 12 months, but that sub-regional centres were expected to "continue to trade strongly and surpass this year’s total.”

Going forward, he said, a number of institutional and listed investors had a strategy to acquire non-discretionary anchored neighbourhood and sub-regional centres, but while demand for regional centres was likely to continue to be robust, supply of investment product would be limited, hence there would be fewer transactions going forward.

He pointed to competitive interest in assets with strong lease profiles displaying robust income growth or expansion or development potential.

Institutional  investors, superannuation funds and offshore investors are expected to be the most active over the remainder of 2013.

The Colliers International Australian Retail Investment Review 2013, which covers transaction activity of greater than $10 million across Australia, found that NSW had the largest share of retail investment activity over the past year, with 35 sales, including half of all regional centre transactions. But the largest increase in activity was in Victoria, which saw investment in the state nearly double to 27 sales,” said Ms Farren.