Australia’s eastern seaboard, particularly New South Wales, is benefiting from multiple tailwinds as the national economy continues its rotation from mining to services, according to Colliers International.
One factor that has provided substantial support to the New South Wales economy has been its substantial population, which is home to roughly 32 per cent of Australians, the real estate firm stated.
Colliers added this population is now growing in line with the national average of 1.6 per cent, which is good for New South Wales given its historic underperformance.
The real estate firm said the economic prospects for the state are being enhanced by unprecedented levels of infrastructure spending with a combined project value over $60 billion, comprised largely by road and rail infrastructure, but supplemented by other social infrastructure type developments.
In terms of retail, New South Wales has maintained its top spot for spending, capturing 33 per cent of the nation’s monthly retail sales volumes, according to Colliers.
New South Wales is trailed by Victoria (26 per cent) and Queensland (21 per cent).
The property firm stated the rate of sales growth has typically been more buoyant in the south east, with New South Wales growing 2.91 per cent over the year to August 2017, while Victoria recorded 3.41 per cent retail sales growth over the same period.
“Australia’s retail sales growth is becoming increasingly skewed to non-discretionary spending however in New South Wales, we have witnessed strong growth in household goods and dining, together with supermarket sales,” Colliers stated.
These projects will enhance domestic business productivity together and enhance the attractiveness of foreign investment within the state, Colliers stated.
NSW neighbourhood centres investment rises
A report by the real estate firm showed investment into the neighbourhood sector grew by over 32 per cent from the FYE2016 year with over $2.06 billion in transactions recorded on the back of a large increase in transactions occurring in Queensland, with 32 sales over $828 million accounting for over 43 over cent of all neighbourhood centres sold nationally.
Activity within the neighbourhood market was focused primarily within New South Wales and Queensland, the two states representing almost 71 per cent of transactions within the retail sector. By quantum, this equates to over $1.356 billion in sales.
According to Colliers, the SCA Property Group were the most active purchasers of neighbourhood centres, acquiring over $306 million in the sector in over 10 transactions.
There were no transactions over $50 million through FYE2017, with the average transaction occurring at a price point over $27.84 million which is higher than the average sale price during the record year of FYE2015. The activity at this sub $50 million price point highlights the opportunities available to private investors within the market, who were very active throughout the year, making up over 50 per cent of purchasers and over 54 per cent of vendors.
Marketfair Campbelltown in western Sydney, New South Wales was the largest single neighbourhood transaction during FYE2017. The centre was purchased by Fort Street Real estate Capital for $48.25 million at a yield of 6.31 per cent, falling within Colliers International New South Wales neighbourhood shopping centre yield band of 5-7 per cent.
The high frequency of sales volumes within the neighbourhood sector has facilitated an element of repricing to occur across the asset class, with average national yields compressing 38 basis points to 6.5 per cent over the 12 months to June 30, 2017, led by Victoria and New South Wales where average yields compressed 65 basis points to 5.73 per cent and 6 per cent respectively.
Yield compression was less pronounced in Perth and Brisbane where average neighbourhood yields currently sit at 6.75 per cent and 7.63 per cent respectively.