RCA Insights

Australian Retail Sector Comes to Life in Early 2021

By on July 13th, 2021

Australia’s retail sector has endured well-documented structural and cyclical headwinds over the last few years, resulting in many investors shying away from the sector. Covid-19 exacerbated these struggles, with lockdowns driving people to increasingly shop online. Yet recently, investors have come back to the sector, acquiring assets even in the subsectors that have been firmly out of favour for several years.

Retail transaction volume for the first half of 2021 reached A$4.3 billion ($3.2 billion), preliminary Real Capital Analytics data shows, outstripping first half volume in 2019 and approaching the full year total for 2020. With another A$1.4 billion of retail transactions pending, 2021 is shaping up to be a bit of a comeback year for the strained sector.

Sub regional centres are one segment that had been in the doldrums. However, in the first half of 2021, sales of these centres reached just over A$800 million across Australia, representing the best start to a year for the asset class since 2015. (See Property Council of Australia retail classifications.) The results are in stark contrast to 2020, when a little more than A$900 million transacted over the entire year. The average sale price rose to A$100 million from the previous high of A$89 million.

bar chart comparing deal volume for selected Australian retail sector segments

Transaction volume of city centre shops has also shot up. Despite quieter CBDs resulting from shifts in work patterns, investors are making some sizeable acquisitions. For example, the David Jones on Elizabeth Street in Sydney sold to a consortium of Charter Hall funds for A$510 million, in what was the second largest deal across any sector in the first quarter of 2021. Not yet closed but in the pipeline is the Myer Melbourne deal, with Charter Hall and Abacus each acquiring a 33% stake, reflecting a A$406 million valuation.

The pandemic has benefited big box retail (such as Bunnings) as well as large format retail centres (that is, homeware-focused shopping centres). Deprived of overseas travel and flush with government stimulus packages such as the federal government’s HomeBuilder grant, owners have been spending big on home improvements. Investors have taken note with both segments seeing substantial increases on previous years. Just over A$500 million has been spent on these two asset classes, back to near the levels seen in 2019.

Neighbourhood centres were already in high demand in 2020 and this trend has continued into 2021. During the pandemic people have been forced to shop more locally, thereby increasing the value of their local retail. In the first half of 2021, just over $330 million of these neighbourhood centres transacted.



Strong performance by specific segments of the retail sector may not be the only reason investors switched back to retail. The industry’s struggles impacted the value of the underlying assets. Since peaking in mid-2018, average price per square metre as measured by the RCA Hedonic Series steadily fell to reach $5,250 by late 2020, a price average not seen since early 2017. The declines in value may have motivated buyers to return, since retail still forms an integral part of a diversified property portfolio.

Increased transaction volume for higher quality retail assets has pulled up average pricing, which may also have encouraged current owners to sell.  With the market appearing to stabilise somewhat, owners seem to be more willing to part with well-performing centres because they will not necessarily have to accept bargain-basement prices.

Whatever the investor motivation is for trading retail assets, it seems clear that 2021 may be a bit of a turning point for Australian retail investment — but, for the first time in several years, perhaps turning to something good.


© Real Capital Analytics

RCA will publish the new edition of Australia Capital Trends on July 29. This edition examines pricing and transaction volume for Q2 2021 and ranks the top buyers, sellers, and deals of the year so far.  

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Benjamin Martin-Henry

Head of Analytics, Pacific

Benjamin Martin-Henry is the Head of Analytics in the Pacific region and an experienced market commentator, working in commercial real estate research for over a decade. Based in Sydney, his particular focus in recent years has been in the capital markets space and the nascent build-to-rent sector.