FRP Capital Brickworks Information Memorandum July 2023 - Flipbook - Page 18
Brickworks Marketplace
Information Memorandum
17
The Australian Retail
Value Proposition
Investor confidence has risen given
the faster than anticipated recovery in
the economy and labour market from
the downturn in 2020. The shopping
centre fundamentals proved to be
more resilient because of stimulus and
cyclical macro economic drivers leading
to strong retail spending growth.
The yield spread and capital value divergence to other
sectors resulted in the emergence of a compelling value
proposition leading to high levels of investment activity.
Regional shopping centre yields are now 134 basis points
(bps) higher than prime industrial and 18 bps higher than
prime CBD office benchmarks. Sub-regional yields are
214bps higher than industrial and 98bps higher than
CBD prime office.
By global comparison, Australian retail asset values have
been far more resilient, reflecting differences in town
planning, provision of retail floorspace, retail industry
composition and economic performance.
Vacancy rates in the retail sector were also more
resilient than most anticipated. Vacancy rates for
shopping centres, excluding the CBDs, only moved
up by less than one percentage point since December
2019 before the pandemic, from 4.0% to 4.8% in
December 2021.
Retail project completions have been low since 2010
by historical standards and are expected to reduce
further. The medium-term supply pipeline continues
to be revised down, with many regional and large
sub-regional projects being deferred or scaled back.
Furthermore, project commencements over the last
12 months (to 4Q21) have been low at just 201,300sqm,
well below the 10-year average of 391,100sqm.
The combination of a shrinking supply pipeline
and potentially strong population growth from the
re-opening of borders and international migration,
is likely to drive further improvement in retail spending
and sales productivity within shopping centres over
the medium term.
YIELDS BY SECTOR – AUSTRALIA
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2007
2009
2011
CBD Prime Office
2013
Regional
2015
2017
Sub-regional
2019
2021
Prime Industrial
Note: Sourced from JLL Research, South Australia Investment Case 2022.
