Retail investment in Australia soars to $2.6b in Q4 2023

Regional and sub-regional centres attracted over half of retail investment volume in 2023.

Retail investment volumes in Australia surged in the second half of 2023, reaching over $2.6b in transactions in the fourth quarter of 2023, up 86% from the previous quarter and more than doubling the volume from the second quarter, according Savills’ Market in Minutes: Retail Investment March 2024 report.

The report said the country's financial markets are showing early signs of recovery in 2024, with anticipation of interest rate cuts sparking a shift in investor sentiment.

Several institutional investors, including Lendlease, Charter Hall, Dexus, and Abacus, have shown interest in reallocating capital into alternative opportunities, leading to the selective disposal of retail assets and the stabilisation of large mall sales.

Moreover, regional and sub-regional centres attracted over half of retail investment volume in 2023, with notable transactions including the acquisition of Cairns Central and Settlement City by Fawkner Property and PAG, and Haben's full ownership takeover of Stockland Townsville.

Neighborhood centers also remain a top investment choice, constituting about 22% of total investment volumes over $10m. Queensland's market share accounted for 26% of national neighborhood center volumes.

Despite a decline in large-format retail transaction volumes, the sector remains resilient, showing less yield softening compared to other retail subsectors.

Retail spending also rebounded, particularly during Black Friday/Cyber Monday sales events, with positive growth in categories like clothing, footwear, personal accessories, and household goods.;

ALSO READ: Australians prefer in-store retail due to digital shopping fatigue

Property fund returns have experienced a decline, with retail specialist funds performing relatively better due to positive income growth and re-leasing spreads reported by retail centre landlords.

Looking ahead, anticipation of interest rate cuts is expected to stimulate investment activity gradually throughout 2024 and into 2025. 

Off-market transactions and cautious market testing by institutions are also expected, with optimism growing as the interest rate environment stabilises.

“The interest rate environment is stabilising, providing more clarity on the cost of debt, and this will aid decision making, particularly for those investors with capital waiting on the sidelines,” the report stated. “There is certainly more optimism that the gap between buyer and seller expectations will improve, driving a gradual uptick in major investment activity.”