2018 in Review
Retail investment activity has remained at a high level since 2012, with $8.1 billion transacting in 2018. Historically, total transactions broadly ranged between $2.0 billion and $4.0 billion (1990 to 2011) per annum but has been above $6.0 billion per annum for seven years, demonstrating the increased liquidity and demand for assets within the sector.
Investor sentiment improved as the year progressed. Buyers were cautious at the beginning of 2018 over the sustainability of market fundamentals and the uncertainty about the impact that Amazon would have on the sector. Tentative signs of recovery in discretionary retail spending began to emerge and the uncertainty surrounding the launch of Amazon in Australia which was perceived as underwhelming in terms of price and product range, reassured investors that the near-term ecommerce impact may be less significant than the market originally anticipated. Availability of investment product was higher in 2018 than in previous years, with a number of assets continuing to be offered as ‘off-market’ opportunities.
While activity was high in value terms, the number of transactions fell notably reflecting the skew towards larger transactions. There were 123 transactions in 2018, down from the peak of 242 in 2015 and 190 in 2017. The most notable slowdown was in the $5 million - $25 million bracket (55, down from 113 in 2017). The most common assets within this price bracket are large format retail centres, non-metropolitan neighbourhood shopping centres and freestanding supermarkets. There was a high concentration of activity in 2018. The top five transactions by value in 2018 accounted for approximately 34% of total activity, a similar level to 2017 (37%).
The type of shopping centres sold in 2018 was relatively evenly split between the major shopping centre formats – sub-regional (25%), neighbourhood (23%) and regional (21%). Sub-regional shopping centre activity increased notably in 2018 ($2.0 billion) compared with 2017 ($1.1 billion) as investors continue to seek value in the retail sector and remain attracted to the high sub-regional yields relative to other retail formats.