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News release

Sydney

Retail sales total $2.049 billion for the first half of 2010, almost surpassing total 2009 annual sales

WA, NSW and ACT markets have already surpassed 2009 full-year figures


SYDNEY, 5 JULY 2010 - Australian retail sales total more than $2.049 billion at the mid-year point and are close to the $2.494 billion total annual sales figure recorded for the full year of 2009, according to Jones Lang LaSalle’s first half 2010 national sales figures.
 
Retail sales in Western Australia, New South Wales and the ACT have each surpassed the 2009 full-year sales totals in their respective markets.
 
Summary of statistics
 
 
General investment market trends
 
Simon Rooney, Head of Retail Investments Australia, said, “The recovery in retail sales volumes in the first half of 2010 largely reflects much stronger sentiment and buyer depth at the larger end of the investment market.
 
“The re-capitalisation of A-REITs and the rebalancing of fund mangers’ portfolios have resulted in many local buyers returning to the market, with significant capital now looking for placement in counter cyclical and quality opportunities.
 
“Offshore investors have also remained interested in Australia due to its strong economic growth prospects, relative to other developed countries, combined with our highly transparent real estate markets.
 
“This increased buyer depth and a stabilisation of yields over recent quarters has given owners the confidence to test the market for bigger assets. The sale of the entire ING Retail Property Fund portfolio for a reported $1.4 billion in H1/2010 is a testament that there are now numerous major players back in the market,” said Mr Rooney.
 
State by State
 
Western Australia
Retail sales in Western Australia contributed close to 40% of retail sales in H1/2010. The $814.5 million of retail assets sold in the first half of 2010 compares to $532.5 million over the whole of 2009, already representing a 53% increase.
 
This significant volume of transactions was largely underpinned by the sale of the $475 million Lakeside Joondalup, together with additional assets as part of the ING Retail Property Fund, including the Harbour Town Perth outlet centre and Armadale Shopping City.
 
This transactional activity in Western Australia in the first half of 2010 also follows significant activity in the second half of 2009, with the sale of a 50% interest in Westfield Whitford City for $256.5 million and David Jones Perth for $114.5 million.
 
Mr Rooney said, “Strong investor demand can largely be attributable to a number of significant resource projects, particularly the Gorgon Gas project, which are driving investment, jobs and population growth, and generally stimulating stronger confidence in Western Australia’s economic prospects than in most other regions nationally.
 
“In addition, the proposed review of the State Government’s planning instruments, which advocate the removal of the limit on retail floor space of Perth’s shopping centres, has stimulated further interest in the Western Australian retail market.
 
This would create additional investment potential in existing shopping centres, in a market which has been stymied by these controls and has been subsequently under invested, in relative terms,” he said.
 
New South Wales

New South Wales retail property transactions in the first half of 2010 have reached $428.7 million, which is already a 108% increase on the full-year total sales in 2009 of $206.4 million. 
 
Mr Rooney said, “NSW transactions were particularly weak in 2009 and the recovery reflects the fact that the economy is in cyclical recovery, with retail spending in NSW being the strongest than any other State over the past 18 months.
 
“In addition, this rebound in transactional activity also reflects the greater quality of stock offered to the market over the first half of 2010, which has been largely due to the greater confidence vendors have had to test the market as yields have stabilised over the recent quarters,” he said.
 
Queensland
In complete contrast to NSW, Queensland retail sales remained strong through 2009. Very strong returns over several years prior to the Global Financial Crisis (GFC) meant that Queensland vendors had generally been more willing to test the market post the GFC.
 
Mr Rooney said, “However, the first half of 2010 has witnessed relatively subdued transactional activity, which is largely a factor of limited stock being offered to the market, as a number of the vendors who were keen to sell have done so in 2008 and 2009.”
Retail turnover outlook
 
Australian retail turnover has been relatively strong over the past 18 months, supported by considerable fiscal and monetary policy measures taken. The general retail environment has softened slightly more recently as the stimulus is withdrawn. This is reflected in a fall in consumer sentiment measures over recent months after six interest rate rises by the Reserve Bank of Australia in late 2009 and early 2010.
 
According to National Retail Analyst at Jones Lang LaSalle, Leigh Warner, “Retail trade does appear to have finally entered a post-stimulus lull. Current renewed economic uncertainty surrounding European sovereign debt problems are also likely to have added to this shift in the confidence of consumers.
 
“Nevertheless, it is easy to over state the bad news and it should be recognised that the fundamentals underpinning spending remain very solid. That is, unemployment remains low (5.2% in May 2010), population growth remains strong (2.0% over 2009), house prices are rising, albeit at a slower pace, and residential housing construction is picking up.
 
“We expect that these factors will continue to support spending at solid levels over the next twelve months.
 
Consequently, we expect that turnover will continue to grow very moderately in the short-term, but will build as some of the uncertainty clouding consumer sentiment disappears later in 2010,” said Mr Warner.
 
Retail property outlook
 
Retail vacancy rates remain low, particularly in the regional (0.7%) and sub-regional (1.8%) markets (these are preliminary Q2/2010 vacancy rates). Jones Lang LaSalle expects that vacancy will be relatively stable over the next twelve months. However, short-term economic uncertainty will keep rental growth moderate.
 
There has been some moderate yield tightening over recent quarters, which reflects improving sentiment and buyer depth. It is expected that yields will be largely stable over the next 12 months.
 
Major transactions
 
• ING Retail Property Fund Australia - A consortium of Lend Lease managed funds acquired the ING Retail Property Fund of Australia for a reported value of AUD1.4 billion in a deal which settled in March, 2010. It is understood there were 14 assets, of which consisted of a major regional shopping centre, a number of established outlet centres, together with a number of sub-regional and bulky good centres.
• The jewel of the ING Retail Property Fund Australia, was Lakeside Joondalup, WA, a major regional shopping centre. This was sold by Jones Lang LaSalle on behalf of ING for a price of $475 million, on a yield of approximately 6.50%. The Centre is situated within a high population growth corridor in the north-western suburbs of Perth and included an executed agreement for lease with Myer to house a department store, a major element of a potential development. Lend Lease and Future Fund acquired a joint interest in this asset.
• In late December 2009, a 50% interest in Westfield Whitford City, WA, major regional shopping centre was sold by Jones Lang LaSalle on behalf of DEXUS Property Group for a price of $256.5 million to Singapore based GIC Real Estate on a yield of approximately 6.70%. The Centre has a total GLA of approximately 77,778sqm and is located in the north-western suburbs of Perth and included an executed agreement for lease with David Jones to house a department store.
 
Investment activity pipeline
 
Mr Rooney said, “Jones Lang LaSalle is currently managing approximately $2.0 billion in major retail asset sales and we expect at least an additional $1.0 to $2.0 billion to be transacted by the end of 2010.”
 
Some of the firm’s major retail asset opportunities include but are not limited to:

• Australian Direct Factory Outlet Portfolio. Comprising over 326,659 sqm of Gross Lettable Area, the iconic portfolio consists of 13 high quality assets, at nine locations around Australia, together with an identified development pipeline and significant value creation opportunities. The portfolio dominates Australia’s niche outlet centre market in Australia, with a market share of approximately 45% and 52% by floor area and number of stores, respectively. Jones Lang LaSalle began marketing he DFO portfolio in February, 2010.
 
• Top Ryde City Shopping Centre, New South Wales. A brand new, super prime regional shopping centre situated approximately 11 kilometres north west of the Sydney CBD and comprising over approximately 78,100 sqm. The centre is expected to immediately dominate its large and burgeoning total trade area and presents a rare and counter-cyclical opportunity to acquire a prime regional centre in New South Wales’ traditionally tightly held retail property landscape. Jones Lang LaSalle commenced marketing in April, 2010.
 
• Centro Surfers Paradise, Queensland. Forming one half of the ‘Cavill Mall’ on Queensland’s Surfers Paradise, the centre comprises over 23,282 sqm and is being sold together with an existing Development Application Approval for the construction of a 15 level residential tower above the centre. Jones Lang LaSalle commenced marketing in April, 2010.