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News release


Jones Lang LaSalle Report: Shopping Centre Investment Review and Outlook

Transaction volumes hit record highs in 2012

AUSTRALIA, 6 MARCH 2013 – Jones Lang LaSalle’s annual Shopping Centre Investment Review and Outlook 2013 reveals retail investment volumes hit record highs in 2012, and predicts a continuation of strong activity through the remainder of 2013.

Key highlights from the Report:
• Transaction volumes reached AUD 6.3 billion in 2012, in line with the all-time record high reached in 2003 and were 84% above 2011 levels and 43% above 2007 levels;
• Regional shopping centres accounted for 50% of total volumes in 2012;
• Record levels of activity were achieved, despite low levels of participation from the A-REIT sector as active buyers;
• A-REITs were the largest vendor group, selling over AUD 2.1 billion to recycle capital;
• Unlisted Property Trusts represented the largest buyer group (32%), followed by Private Companies and Investors (24%);
• Offshore buyers accounted for just 11% of direct purchases, but are under-represented in these figures due to a high volume of offshore capital being invested on an indirect basis - largely via investment in third party domestically managed vehicles. Jones Lang LaSalle estimates that the combined value of direct and indirect offshore investment accounted for approximately 30% of transactions.
Comments from Australian Head of Retail Investments, Simon Rooney:
“The most prominent theme in the retail investment market is the growing trend of capital partnering.”
“Through these strategic joint venture arrangements, a number of A-REITs have been able to sell partial shares in major core assets at an opportune time when there is significant pool of capital waiting to be deployed from a range of domestic and international sources.”
“This trend is likely to persist through 2013, and there are potentially significant synergies for large passive investors to partner with local specialist managers of the right cultural fit.”
“Investors are likely to continue to aggressively pursue opportunities to acquire high quality retail assets as they become available, but will remain selective with their requirements as they execute specific investment strategies, which clearly vary between different types of institutions at present.”
“Throughout the remainder of 2013, we expect unlisted wholesale funds, superannuation funds, and offshore investors will lead major acquisitions as these groups continue to build scale within the sector while yields remain attractive.”
“While the large majority of offshore capital remains ‘core’ focussed, some global investors are beginning to broaden their scope and are now beginning to look at core-plus and opportunistic assets.”
“These international investors are clearly looking for more diverse retail investment opportunities. Australia is a ‘mature’, transparent and stable retail market, making it an attractive destination for these groups.”
“We expect that offshore groups will continue to gain greater exposure to Australian retail assets through both direct purchases and further investment into third party domestically managed vehicles. While foreign investment has historically been a cyclical trend, the continuing globalisation of retail investment markets, suggests international groups may become a more permanent retail landlord.”
Comments from National Retail Analyst, Research and Consulting, Andrew Quillfeldt:
“The strong volume of transactions in the market suggests investors are confident in the long term outlook for the sector, but the fact that yields haven’t tightened significantly to date suggests an element of cautiousness regarding structural shifts in the industry.”
“Consumers have been reducing debt and increasing savings for some time now. This build-up of cash reserves and stronger financial position could potentially be a positive for the retail sector when confidence is restored.”
“The outlook for retail property is relatively positive, and we are forecasting a gradual recovery in market conditions.”
“The retail property market fundamentals have now broadly stabilised and will be supportive of an upturn as retailer demand slowly recovers.”
“Vacancy rates are stable and marginally above long term average levels, and the forward supply pipeline remains relatively thin. The focus of many major institutional landlords has been on refurbishment and in some cases, expansion, but the development of new centres is still limited suggesting low levels of new supply over the medium term.”
“Yield spreads between retail formats remain wide by historical standards. Some investors have emerged to target the sub-regional and bulky goods sectors in order to capitalise the on potential yield compression as this spread narrows to levels more aligned with long term averages.”​