Outlook for 2019
Investors will consider opportunities given the emerging value in the retail sector in 2019. Buyers will have more selective criteria which will be reflected in pricing. Unlisted funds are likely to continue to acquire but at a slower pace than in previous years given that returns for core retail have compressed and are approaching the investment hurdles required by many of the underlying investors. Offshore investors are likely to remain attracted to Australian retail given a range of factors which support underlying fundamentals of retail relative to other mature economies. The depreciation in the Australian Dollar also presents an opportunity for global capital sources.
Conflicting drivers for the outlook for retail fundamentals suggest stable conditions in 2019. The short term outlook for retail turnover and leasing conditions is linked to wage growth. A recovery in wage growth has begun and retail turnover growth has started to accelerate (July 2018 to November 2018). However, subdued housing market conditions may offset the impact of an improvement in household income in the short term. Long term demographic trends remain supportive of retail sales growth despite ecommerce penetration.
Changes in demographics, social trends and consumer spending habits will have complex implications for the design, supply and management of shopping centres over the long term. Shopping centre owners and retailers will continue to evolve and adapt their strategies to the new retail environment.