Lack of stock slowing Brisbane retail sales activity: HTW

Sales activity in the Brisbane retail world is starting to slow with stock generally being very tightly held, according to Herron Todd White’s (HTW) latest report.

The property advisory firm says that sellers cannot easily replace their investments with equivalent yields in any other asset class.

Yields for neighbourhood centres have continued to tighten throughout the course of 2016, however, there is now a perception that we are approaching the top, primarily due to the tightening market for funding which is now requiring greater levels of equity.

The overwhelming demand for well leased retail stock in the sub $5 million market has created a seller’s market with buyers often cascading from one sales campaign to the next.

When they miss out on the first property the urgency to buy the next can be very strong.

Most activity remains in the convenience and neighbourhood sectors, but even there the quantum of transactions is slowing.

It is also now timely to pause and reflect on the quantum of capital growth that has occurred in these markets over the past three years.

A good recent example is the sale of the Sandstone Point IGA anchored centre which recently sold for $10.395 million showing a yield of 7.04%.

This property sold three years earlier for some $8.25 million and showed capital growth of 26% over that period. This is reasonably reflective of the neighbourhood and convenience centre markets generally.

More broadly, yields for well leased neighbourhood centres in strong locations are now well entrenched in the low 6% yield range.

Service stations are also hot at the present time.

The Caltex complex at Northlakes was recently contracted at a yield of 5.13%, showing a staggering 48% capital growth over a three year period since its previous purchase.

Whilst demand is likely to remain strong, we consider that the market is nearing the peak with the likelihood of yields bottoming out over the next six to 12 months.