Retail rents finally on the rise: CBRE Research

Retail rents finally on the rise: CBRE Research
Jonathan ChancellorJanuary 20, 2015

Australian retail rents are beginning to rise across the board after a prolonged lag to retail trade, with CBRE’s Q4 Australia Retail MarketView report highlighting 3.7% CBD growth in national rents in 2014, underpinned by a significant 10.7% rental hike in NSW.

Rental growth is also emerging in the regional, sub regional, neighbourhood and large format sectors according to CBRE’s head of research, Australia, Stephen McNabb, with regional face rents tipped to grow by 2.6% this year, followed by 2.8% growth in 2016.

“Expectations for rent growth are  improving across most parts of the retail sector reflecting the improved trading conditions and sales growth seen in 2014,” McNabb said.

“Retailer profit margins have fallen in the past two quarters due to rising competition and the weakening AUD but are still relatively high after a period of consolidation and cost cutting.  Retailer business confidence, whilst modest, is improved on the weak levels of 2013. Fundamentals are now more supportive of rental growth and this has driven stronger investor interest in the retail sector.”

A key driver of CBD rental growth has been the continued entrance of foreign retailers, which has led to increased demand for prime CBD space.

This was highlighted by the Q4 opening of French luxury cosmetics retailer Sephora and Uniqlo, both in Sydney’s Pitt Street, and Swedish mid-range fashion retailer COS opening its doors in Elizabeth Street Melbourne.

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Source: CBRE, Q4 2014.

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.
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