A regional shopping centre deal that netted Lendlease $390 million was the largest retail transaction in Queensland in the past five years and the second largest retail transaction of 2023.
Fawkner Property acquired the Cairns Central shopping centre at a rate of $7501 per square metre to add to its stable of petrol stations, shopping centres and convenience retail.
The acquisitive investment fund’s acquisition of Midland Gate Centre in Perth for $465 million was the biggest deal of the year.
Colliers managing director of retail capital markets Lachlan MacGillivray and McVay Real Estate managing director Sam McVay put the deal together.
The asset comprises 186 tenants including Myer, Kmart, Target, Coles, Woolworths and Event Cinemas, with a weighted average lease expiry of 6.3 years. It has a gross lettable area of 51,972sq m on a 9.4ha site near the Cairns train station.
“The Cairns Central deal was also one of the few remaining opportunities to secure a 100 per cent interest in a regional shopping centre in this investment cycle,” MacGillivray said.
“We expect availability for this calibre of product to tighten further in 2024 and beyond.”
MacGillivray said super regional centres remained tightly held and in limited supply.
“Due to their large landholding requirements, development of new super regional centres is scarce nationally,” he said.
“Based on population growth projections and the current development pipeline, our analysis found that super regional shopping centres will experience an undersupply of 420,000sq m GLA by 2032 and current retail space per capita ratios will be unable to be maintained.”
MacGillivray said existing super regional assets could absorb up to $4 billion in additional retail sales by 2032 off the back of population growth and undersupply of retail floorspace.
Investors have focused on non-discretionary retail as a bright spot in the otherwise stagnant market.
While the Australian economy may have dodged a recession in 2023, the retail sector has felt the pinch of strong inflation and consecutive interest rate hikes, according to Deloitte Access Economics partner David Rumbens.
Rumbens said the September quarter had brought the first positive change in real retail turnover since late 2022, an increase of 0.2 per cent on June sales volumes, but retailers were not out of the woods.
“Retailers are still experiencing the effects of a significant sales deficit over the past year, with overall sales volumes having fallen 1.7 per cent compared to a year ago, despite rapid population growth.
“In per capita terms real retail sales growth is down 3.6 per cent over the year to September.
“Consumers are continuing to avoid discretionary spending where possible, which has led to a substantial gap between food and non-food retail sales growth.
“Over the year to September 2023, food sales in real terms have increased by 0.6 per cent, while non-food retail sales have declined by 4.2 per cent.”
