Neighbourhood and convenience shopping centre deals flourished in Brisbane in 2015: HTW

Brisbane is approaching the peak of the retail market cycle, according to valuation firm Herron Todd White's recent property clock.

The clock is a simple broad brush means to suggest where property markets are as at February 2016 - and what direction prices are moving in, with an accompanying analysis.

Neighbourhood and convenience grade shopping centres were the flavour in Brisbane in calendar year 2015, with a large volume of transactions.

The high levels of demand and active market was seen across all market sectors, and has seen investment yields compress by up to 100 basis points over the course of the year, a significant shift in such a short time period, says the HTW report.

Among the neighbourhood centres, there were a number of transactions involving newly developed supermarket-based centres in growth areas.

Convenience centres are also in strong demand and many such properties in the inner ring suburbs are also now benefiting from expectations that they may offer future redevelopment potential.

Prime grade freestanding retail assets were realising yields in the range of 5% to 6%, whilst non-institutional grade retail properties attracted slightly softer yields of between 6% and 7%. Convenience centres were showing yields of between 6.5% and 8.0%.

Recent evidence indicates that yields are probably nearing the bottom at these ranges, however, there is no indication as yet of any likely upward movement. Certainly, retail assets are generally being tightly held due to the lack of yield in alternate investment classes, says the HTW report.

Second tier assets saw compression of yields, though these remain some 100 to 200 basis points higher than premium grade assets.

Rental growth remains patchy with very little growth evident in current markets. There has however been a gradual decline in vacancies in the higher quality centres. Future rental growth, however, is still likely to only keep pace with inflation at best.

Large format retail properties have been coming back into popularity with a significant compression of yields since the difficult post-GFC days. Vacancies are generally declining, however rent growth remains largely stagnant, it concludes.