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Modest rent growth is emerging nationally in CBD retail markets and in the bulky goods/ homemaker sector, but leasing activity is still divergent
JLL's research figures for Australian retail markets are showing evidence of a rental growth recovery in the CBD and bulky goods/ homemaker retail sectors.
March quarter figures show modest rental growth was recorded within some of the CBD retail markets, particularly in the super-prime locations that are attractive to international retailers. Average prime and super-prime rents grew by 0.25% in Sydney and Melbourne in Q1 2015.
For leasing markets nationally across the shopping centre categories of regional, sub-regional and neighbourhood shopping centres, figures for the first quarter of 2015 show rents were broadly stable and remained unchanged from the previous quarter.
JLL's Australian Head of Retail, Property & Asset Management, Tony Doherty said, "Despite supportive economic drivers of record low interest rates, rising household wealth and an improvement in overseas tourist arrivals, it is still not translating into stronger demand for space and the leasing market remains challenging in most areas.
"There continues to be a wide variance of performance between individual retailers and individual shopping centres. The retailing industry remains a very competitive environment.
"Retail landlords have had to have a major focus on refurbishing existing assets to refresh the tenant mix and grow market share within their trade area.
"A number of shopping centres are also expanding, where the catchment area can support it, to include additional stores such as major international fashion brands, more convenience-based services and incorporating significant dining precincts.
"The three-year supply pipeline (2015-2017) has grown by 45% in the last 12 months, from 1.02 million sqm to 1.48 million sqm as landlords continue to progress projects through the development process.
"Sydney (33%) and South East Queensland (31%) account for the bulk of the new supply over the next three years, followed by Melbourne (22%), Perth (9%), Adelaide (6%) and Canberra (1%).
"The supply will be relatively evenly split between regional centres, sub-regional centres and neighbourhood centres," said Mr Doherty.
Approximately 521,400 sqm of retail supply completed construction in 2014, with a further 73,100 sqms completing in Q1 2015. A total of 418,500 sqm is scheduled to complete in 2015 before rising to 649,500 sqm in 2016.
Among the Q1 2015 completions were: Stockland's Baldivis Shopping Centre in Perth which added 19,800 sqm, Stockland's Wetherill Park Stage 1 extension (11,000 sqm) in Sydney, the new Summerhill Shopping Centre in Reservoir, Melbourne (16,500 sqm), the Revesby Worker Club in Sydney (11,400 sqm) and Woolworths Meadowbrook in Brisbane (5,500 sqm).
JLL's Andrew Quillfeldt, Associate Director of Strategic Research, said, "The bulky goods or homemaker market has been stimulated by strong residential construction activity, and the subsequent rebound in household goods spending. The April figures released by the ABS shows household goods spending growth continues to strengthen, up 8.2% year on year, nationally, with New South Wales and Victoria being the major drivers, with growth of 13.8% and 8.5%.
"JLL figures show bulky goods rents rose by 0.5% in both Sydney and Melbourne in Q1 2015, and by 1.0% and 1.5% respectively over the 12 months to Q1 2015, but have been stable in all other markets over the past quarter, and over the past year.
"Modest rental growth has also been recorded within some of the CBD retail markets. Average prime and super-prime rents grew by 0.25% in Sydney and Melbourne in Q1 2015, but annual growth has been stronger in super-prime rents with Sydney (+1.8%), Melbourne (+1.3%) and Brisbane (+1.0%) all recording positive growth.
"The results indicate average rents have remained broadly stable across the regional, sub-regional and neighbourhood shopping centre formats in Q1 2015 and our anecdotal feedback indicates incentives remain unchanged but relatively elevated to historical levels," said Mr Quillfeldt.
Australian Head of Retail, Property & Asset Management
0418 102 201
Associate Director of Strategic Research
02 9220 8728