Australian shopping centres still in demand

Australian shopping centres still in demandRetail centres Australia-wide will experience mixed conditions over 2015, driven by regional variations in residential markets and employment, but the retail investment outlook is positive, according to m3property’s latest ‘Shopping Centre’ report. Exceptionally low interest rates and a high volume of capital chasing assets will keep buyer demand for shopping centres positive in the coming year, suggests m3property’s research, while structural and cyclical challenges and still-fragile consumer sentiment will test retailers and fuel change across the sector.The m3propertyreport examined retailer and investment activity in regional, subregional and neighbourhood centres across Australia.Though several key drivers of retail tenant demand were present over 2014, rental growth remained moderate. Occupancy costs showed a marginal average drop to 14.8 per cent.Investor demand was strong last year, with low-cost capital and readily available finance set to drive further demand for retail centres over the next 12 months. With the upturn in trading conditions, however, owners are increasingly looking to hold onto assets, slowing sales activity.Novion joining forces with Federation Centres will be one of several mergers and takeovers that m3property expects to see in 2015 as companies look to scale to drive growth.Key retail influences going forward include: lowered economic growth, offset by lower oil prices and interest rates; renewed consumer confidence; and structural sectoral shifts, including changes in technology (firms’ capacity to leverage the internet, “a key driver of success in the new competitive landscape”), demographics (demand fuelled by strong population growth) and consumer preferences. Retail development should remain robust given continuing strength in retail building approvals, and competition policy is likely to be an emerging theme.Non-food retailing growth last year was led by a surge in household goods retailing, up 9.7 per cent. Discount department stores continue to benefit from a shift in consumers’ preferences to low-cost goods, while the food and grocery market remains highly competitive.Regional and subregional supply is set to strengthen, m3property predicts, with investment demand buoyant and yields tightening. Meanwhile, neighbourhood centre sales activity stood at record levels last year with $2,114,739,000 transacted.The overall outlook for shopping centres is positive, the report concludes. Retail floor space supply will likely increase over 2015, and if the federal government’s forecast 3 per cent growth in household consumption in 2014-15 eventuates, a consequent strengthening of retail trade is likely.With low interest rates, a lower Australian dollar, rising wealth levels and a gradual transition to non-mining sectors, m3property expects “a sustained rebound in consumer confidence” in 2015. “This remains one of the most important factors required to support retail sales growth and leasing demand going forward,” the report states. To read the report click here