Resilient Retail Caps off Record $12.7bn Year

Australia’s retail sector has shrugged off the sluggish sales of the pandemic to bank a record $12.7 billion in asset transactions across 2021.

Colliers research found there had been an 82 per cent increase in the volume of retail assets sold in 2021, compared to the previous year, increasing from 91 to 166 with institutional investors snapping up about 60 per cent of transactions.

New South Wales chalked up 40 per cent of the sales, followed by Queensland, which accounted for about a third of sales. Victoria recorded about 18 per cent of total sales.

And it’s a trend that was seen more broadly across the commercial sector with a record almost $50 billion in transactions last year, and yield compression across the board.

Colliers head of retail investment in Australia Lachlan MacGillivray said consumer confidence had been strong to bank the all-time high of $12.7 billion in retail transactions.

“The recovery of consumer confidence, and the eagerness of consumers to return to bricks-and-mortar stores, has continued to support the growing industry while pent-up demand and ability to spend has support asset turnover and allowed investors to see upside potential and opportunity,” MacGillivray said.

“Across the retail market, we have seen high-net worth investors and major superannuation funds looking to deploy capital into land or development-rich assets.

“The consumer preference for social interaction and experience has reinforced asset performance and fuelled a recovery in spending. A notable trend is the evolution of shopping centres from being merely a place to shop, to being more a traditional town centre.

“Assets have reduced dependence on fashion retailers and increased alternative offerings, such as commercial, food, wellness, entertainment and lifestyle components.”

MacGillivray said developers looked to diversify retail assets with office, residential and healthcare offerings to drive foot traffic.

Transaction values by state: 2021

_{^Source: Colliers’ Retail Capital Markets Investment Review 2022}

It was also a big year for regional retail assets with four key transactions amounting to more than $3.7 billion.

Victoria recorded the biggest CBD retail sector sale in 13 years with the $270-million sale of a two-thirds interest in Myer Melbourne. Abacus Property Group and Charter Hall Long WALE REIT each acquired a one-third interest, and Vicinity Centres retained the remaining 33 per cent share.

The $538.2-million, 50-per-cent share in Sydney’s Queen Victoria Building, The Strand Arcade and The Galleries, capped off a big year for Hong Kong’s Link REIT and their Australian investment manager EG Funds.

The Pac and Mac deal, and the sale of Woongong Central and Warringah Mall in the last quarter of 2021, was a signal of the strength of investor sentiment in Australia’s retail market. The assets sold for a combined $3.77 billion, an all-time high for the regional sub-sector.

And in more good news for the retail sector, trade has almost returned to pre-pandemic levels for many retailers.

Commsec chief economist Craig James said retail trade data supported the trend towards experience-based retail.

Commsec data showed spending at cafes and restaurants had rebounded 24.3 per cent in 2021, after dropping 25.4 per cent in 2020.

But James warned that the data continued to reflect the cycles of lockdowns and lifting of restrictions, and it would be hard to “get a true picture on consumer spending”.

“But looking over the entire 2021 year, retail trade rose by a healthy 5.6 per cent with volumes up by 3.5 per cent,” he said.