Retail asset sales down in 2016

shopping, retail, emporium, centreAustralian retail asset sales reached $6.5 billion in the 2016 calendar year, a full $2.9 billion down on last year’s figure and $500 million under the five-year average, according to Savills data.

However, sales still remain above the 10-year average, and have done so for four years consecutively, signalling that demand is still strong but retail stock availability is low.

Yields for enclosed centres remain tight in the 4.5 to 8.25 per cent range, culminating in a record breaking $38 million dollar sale of a Coles in Coburg north in Victoria on a 4.94 per cent yield.

“Eventually [yields] will taper off. The question is when do yields become so tight that private investors are tempted to sell?” Savills national director of retail investments, Steven Lerche, said.

“Timing is important here because it is only when they see that the market is on the cusp of turning and they realise the absolute full value for their assets, that they will feel comfortable making that move.”

Queensland topped the state-by-state rankings, accounting for 32.2 per cent of retail investment sales at $2.1 billion. Australia’s two big population centre’s weren’t far behind, with NSW recording $1.94 billion in sales and Victoria recording 1.74 billion.

Foreign purchases were also down $660 million on last year, reaching $2 billion. North American investor purchases ranked highest at $1 billion, followed by Asian buyers at $800 million.

Domestic buyers were made up of private investors, who made a quarter of all purchases, trusts (24 per cent of purchases) and funds (11 per cent).

 

Lerche said low yields are indicative of historically low post-GFC interest rates, predicting further cash rate cuts in 2017.

 

The Reserve Bank will make their first interest rate decision of 2017 on February 7th.

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