RCA Insights

What Next for Australia’s Robust Retail Market?

By on March 22nd, 2019

Australia’s robust retail property investment market stands in contrast to other leading developed markets such as the U.K. or the U.S. where the retail picture has been bleak or, at best, mixed. Some are questioning whether Australia’s retail investment can keep swimming against the current, however.

In the U.K. retail investment was at the weakest level on record in 2018. And in the U.S., portfolio and single asset sales have declined for three consecutive years, a trend masked in 2018 by a handful of giant entity-level deals.

In Australia retail investment grew by 14% YOY in 2018. Listed retail property owners such as Scentre Group, SCA Property Group and Vicinity Centres were active. In total, listed investors purchased $1.7 billion of retail assets in 2018, the second highest level to date. Moreover, partial share investments accounted for 37% of all transactions – a six-year high – signaling strong demand for good retail assets in a tightly-held market.

1903 Australia retail column chart MAIN_300-01

Concerns about the future of the retail market center on the impact of dimming consumer sentiment and the well-documented threat of internet commerce. Consumer sentiment has been dented by the fall in the Australian dollar, worries about the growing prices on imported goods, rising transport and labor costs, as well as a significant slowdown in residential markets.

Retail property prices in Australia started to plateau in the second half of 2018, having grown 85% since the low of the Global Financial Crisis, according to the RCA CPPI.

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