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Major project completions in the fourth quarter push supply additions in 2008 to record levels
SYDNEY, 4 February 2009 –December quarter statistics released by Jones Lang LaSalle Research reveal that the major metropolitan markets of Australia saw 819,000 sqm of new retail space in 2008, the highest recorded in one year since monitoring began twenty years ago.
“Construction activity in the retail property sector was building up in 2006-07 as developers capitalised on the strong growth of Australia’s economy and retail sector. In 2008 we saw many of these projects come to fruition, driving supply additions to the highest on record,” said Jones Lang LaSalle’s Retail Leasing Director, Peter Seeto.
Numerous large retail projects which completed around the country in the fourth quarter drove supply to record highs. These included ING Waterfront City Docklands and Westfield’s Doncaster extension in Melbourne. In Perth, a major extension to the Lakeside Joondalup Shopping completed, while in Canberra the New Homemaker Hub Bulky Goods centre opened.
Mr Seeto added that while 2008 saw record levels of new supply, this was not likely to continue. “The amount of retail supply activity is declining as projects complete and fewer start construction. The total stock under construction in the monitored markets at the end of 2008 sat at 1.06 million sqm, down 24% from six months earlier,” Mr Seeto said.
Jones Lang LaSalle’s Senior Analyst, Dino Siswadi attributed this to the deterioration in market conditions. Slower economic and sales growth combined with a lack of financing and increasing vacancy in shopping centres is discouraging new development activity.
Jones Lang LaSalle’s bi-annual vacancy survey conducted in Q4/2008 showed a marginal rise in vacancy levels in the retail property sector. Within Regional centres, specialty store vacancy rose from an average of 0.7% nationally to 0.9% while in Sub-regional centres vacancy rose from 2.1% to 2.8%. Neighbourhood centre vacancy rose from 3.6% to 4.3% while in the CBD retail markets (excl. Canberra) vacancy increased from 2.5% to 2.8%.
Mr Siswadi pointed out that the rise was not across the board and that some market segments recorded a decline in vacancy rates. Vacancy rates in the Sydney CBD have declined to 1.8%, equal to the lowest recorded in June 2003. Similarly vacancy rates have also declined within Melbourne and S.E. Queensland’s Regional centres.
In the investment market, Jones Lang LaSalle recorded AUD 309.18 million of retail property transactions in Q4/2008, bringing the total transactions for 2008 to almost AUD 1.75billion, down 59% from the total recorded in 2007.
“In 2008, the investment market was constrained by limited available credit and uncertainty with the global investment market. While we saw transactional activity drop by 59%, we did find a significant shift in the buyer/vendor types,” said Jones Lang LaSalle’s Head of Retail investments, Simon Rooney.
“Following years where institutional investors dominated, private investors are now dominating the market. Private investors have accounted for 53% of purchasers by value, up from 19% the previous year. A-REITS (Listed Property Trusts) on the other hand have become the most common sellers, accounting for 41% of vendors by value,” added Mr Rooney.
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