Improving rental growth is on course · MARKETVIEW Q3 2015 AUSTRALIA RETAIL -5%. MARKETVIEW Q3 2015...

MARKETVIEW

Improving rental growth is on course

Australia Retail, Q3 2015

Q3 2015 CBRE Research © 2015 CBRE, Inc. | 1

4.5% y-o-y Aug

Figure 1: Large format retail centre vacancy rate by selected states

Source: CBRE Research, Q3 2015.

93.9 Sep 0.7% y-o-y Sep 5.8% Sep

KEY POINTS

Retail trade has been growing at a consistent

pace this year, between 4%-5%, with Q315

results estimated at 4.5% y-o-y (3mma).

Yield compression was largely driven by

improving rental growth expectations across

the retail sectors, in addition to lower

required returns for investors. The healthier

retail environment (compared to 2011-

2012) is driving investors towards retail

investments.

Large format retail is experiencing an

increase in tenant diversity.

The pace of first time foreign brand entrants

and expansions has held up so far this year,

with more than 30 stores opening or

securing a lease.

Total returns for retail have outperformed

both office and industrial over the past 25

years. Going forward, we expect retail to

also provide the strongest risk adjusted

returns over the short-term.

0%

5.0%

10.0%

15.0%

20.0%

Dec-0

4

Jun-0

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Dec-0

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Jun-0

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Dec-0

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Jun-0

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Dec-0

7

Jun-0

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Dec-0

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Jun-0

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Dec-0

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Jun-1

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Dec-1

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Jun-1

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Dec-1

1

Jun-1

2

Dec-1

2

Jun-1

3

Dec-1

3

Jun-1

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Dec-1

4

Jun-1

5

Vacancy R

ate

NSW VIC QLD

MARKETVIEW

DIVERGENCE IN PERFORMANCE

AUSTRALIA IS A HOTSPOT FOR FOREIGN

BRANDS

•

•

•


AUSTRALIA RETAIL

Figure 2: Foreign brand retailers’ penetration rates in selected APAC markets

*Number of foreign retailers operating in a country as identified by CBRE divided by total foreign retailers in APAC region


0%

10%

20%

30%

40%

50%

60%

Chin

a

Sin

gapore

Hong K

ong

Japan

Mala

ysi

a

Kore

a

Taiw

an

Thailand

Indonesia

Philip

pin

es

India

Austr

alia

Vie

tnam

New

Zeala

nd

Cam

bodia

MARKETVIEW


AUSTRALIA RETAIL

Figure 3: Retail prime yields by type


STRONG YIELD COMPRESSION

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

Yie

lds (

%)

Regional Sub Regional Neighbourhood CBD Prime Large Format

MARKETVIEW

RETAIL TRADE GROWTH STABILISING

DEVELOPMENT RETURNS DRIVING SUPPLY

FOREIGN RETAILERS – THE NEW ANCHOR

TENANTS?


AUSTRALIA RETAIL

Figure 5: Regional Centre Supply by State



Figure 4: Retail Sales and Regional Centre Rents


Figure 6: Major Regional Centre Supply Pipeline

Regional Shopping Centres

0

100,000

200,000

300,000

400,000

500,000

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Reta

il S

upply

(sq m

)

NSW VIC QLD SA WA ACT

0%

2%

4%

6%

8%

10%

12%

14%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Retail Sales Regional Centre Rents

Centre Name State Development

Type

Current

Status

Total

sqm (net

increase)

Completion

Quarter

Karrinyup

Shopping Centre WA Extension DA Approved

49,903 Dec-19

Pacific Square

QLD Extension

Under

Construction

49,000 Jun-16

Eastland Shopping

Centre VIC Extension

Under

Construction

47,000 Jun-16

Westfield

Chatswood NSW Extension

Under

Construction

45,832 Mar-16

Narellan Town

Centre NSW Extension

Under

Construction

40,200 Jun-17

Chadstone

Shopping Centre VIC Extension

Under

Construction

30,000 Jun-17

MARKETVIEW


AUSTRALIA RETAIL

Regional Shopping Centres

RENT GROWTH SOFT, BUT IMPROVING

YIELDS APPROACH CYCLICAL LOW

Figure 7: Regional Centre Key Stats

Figure 9: Average National Regional Centre Yield

Figure 8: Regional Centre Transactions by State



Note: There were no major transactions in H115


0

500

1,000

1,500

2,000

2,500

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

YTD

Annual Sale

s V

olu

me (

$m

)


3%

4%

5%

6%

7%

8%

Sep-00

Sep-01

Sep-02

Sep-03

Sep-04

Sep-05

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Sep-12

Sep-13

Sep-14

Sep-15

Yie

ld (

%)

Capital Value

Qtr Ann % Qtr Ann Bp

Change

Ann %

NSW 2,158$ 1.0% 5.38% -32 6.9%

VIC 1,664$ 2.9% 5.52% -14 5.6%

QLD 1,605$ 2.6% 5.63% -9 4.2%

WA 1,718$ -2.4% 5.63% -13 -0.2%

SA 1,275$ 0.0% 6.25% 0 0.0%

Aust 1,613$ 0.7% 5.80% -14 3.5%

Indicative Rents (per

sq m) Yield

MARKETVIEW

DEMAND REMAINS SOFT, HOWEVER RENT

GROWTH RE-EMERGING

DDS UNDERPERFORMANCE A CONTINUING

DRAG ON CENTRE PERFORMANCE


Figure 11: Sub-Regional Retail Supply by State



Figure 10: Retail Sales and Sub-Regional Centre Rents

Figure 12: Major Sub-Regional Supply Pipeline


Sub-Regional Shopping Centres

AUSTRALIA RETAIL

(50,000)

0

50,000

100,000

150,000

200,000

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Reta

il S

upply

(sq m

)



Type Current Status

Total

sqm

Completion

Quarter

The Nova Centre VIC New DA Approved

22,000 Feb-18

Tahmoor Town

Centre NSW Extension Under Construction

15,258 Sep-17

Centro Halls

Head WA Extension Under Construction

10,910 Mar-16

Stockland

Caloundra QLD Extension DA Approved

9,012 Dec-17

Warriewood

Square NSW Extension Under Construction

8,015 Jun-16

Parabanks

Shopping Centre SA Refurbishment Under Construction 7,000 Jun-18

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

20

00

20

01

20

02

20

03

20

04

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05

20

06

20

07

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20

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20

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20

11

20

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20

13

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14

20

15

Sub-Regional Rent Growth Retail Sales Growth

MARKETVIEW


AUSTRALIA RETAIL

Sub-Regional Shopping Centres

DEVELOPMENT TO DRIVE RETURNS IN A LOW

RENT GROWTH ENVIRONMENT

YIELDS APPROACHING CYCLICAL LOW

Figure 15: Average National Sub-Regional Yield

Figure 13: Sub-Regional Centre Key Stats




Figure 14: Sub-Regional Transactions by State

0

500

1,000

1,500

2,000

2,500

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

YTD

Annual Sale

s V

olu

me (

$m

)

NSW VIC QLD

SA WA ACT

3%

4%

5%

6%

7%

8%

9%

10%

11%

Sep-00

Sep-01

Sep-02

Sep-03

Sep-04

Sep-05

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Sep-12

Sep-13

Sep-14

Sep-15

Yie

ld (

%)

Capital Value


Change

Ann %

NSW 1,103$ 1.0% 6.15% -71 12.6%

VIC 739$ 0.0% 6.58% -88 13.3%

QLD 1,125$ 2.3% 6.81% -44 8.8%

WA 828$ -0.6% 6.88% -38 4.8%

SA 571$ 0.0% 7.46% 0 0.0%

Aust 871$ 0.6% 6.81% -50 8.7%


sq m) Yield

MARKETVIEW

SUPERMARKET COMPETITION INTENSIFYING

SUPERMARKETS DRIVE NEW SUPPLY

RENTS REMAIN STABLE


AUSTRALIA RETAIL

Figure 16: Neighbourhood Retail Rent Growth (p.a.)

Figure 17: Neighbourhood Retail Supply by State



Figure 18: Major Neighbourhood Centre Supply Pipeline


Centre Name State Developmen

t Type Current Status

Total

sqm

Completion

Quarter

Hope Island Town

Centre QLD New DA Applied 9,470 Dec-17

Emerald City NSW New DA Approved 8,920 Dec-18

Pinjar Road

Shopping Centre WA New DA Approved 8,513 Sep-18

Playford Alive

Shopping Centre SA New

Under

Construction 6,550 Oct-15

Woolworths

Universal Way VIC New

Under

Construction 4,000 Dec-15

Neighbourhood Shopping Centres

(50,000)

0

50,000

100,000

150,000

200,000

250,000

300,000

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Reta

il S

upply

(sq m

)


-2%

0%

2%

4%

6%

8%

10%

20

00

20

01

20

02

20

03

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20

05

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06

20

07

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20

14

20

15

Retail Sales Rents - neighbourhood

MARKETVIEW


AUSTRALIA RETAIL

Neighbourhood Shopping Centres

TURNOVER RENT PROSPECTS LOWER

LACK OF REGIONAL STOCK DRIVING

INTEREST IN SMALLER RETAIL ASSETS

YIELDS CONTINUE TO COMPRESS

•

•

Figure 19: Neighbourhood Retail Rent Growth




Figure 20: Neighbourhood Retail Transactions by State

Figure 21: Average National Neighbourhood Retail Yield

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

YTD

Annual Sale

s V

olu

me (

$m

)

NSW VIC QLD

SA WA ACT

Capital Value


Change

Ann %

NSW 920$ 1.0% 6.29% -109 18.4%

VIC 658$ 1.0% 6.79% -58 9.7%

QLD 710$ 2.2% 7.00% -75 13.1%

WA 592$ -2.5% 7.00% -75 7.9%

SA 464$ 0.0% 7.63% -13 1.7%

Aust 636$ 0.4% 7.17% -56 10.2%


sq m) Yield

4%

5%

6%

7%

8%

9%

10%

11%

Sep-00

Sep-01

Sep-02

Sep-03

Sep-04

Sep-05

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Sep-12

Sep-13

Sep-14

Sep-15

Yie

ld (

%)

MARKETVIEW

DEMAND CONTINUES TO OUTSTRIP SUPPLY

SUPPLY REMAINS STABLE WITH SOME FOREIGN

RETAILERS STRUGGLING TO FIND SPACE

RETAIL SPACE FEATURING MORE

PREDOMINATELY IN NEW DEVELOPMENTS AND

RE-DEVELOPMENTS


AUSTRALIA RETAIL

Figure 23: CBD Retail Supply by State


Figure 22: Retail Sales and Prime CBD Centre Rents



Figure 24: Major CBD Retail Supply Pipeline

CBD Retail

(40,000)

(20,000)

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Reta

il S

upply

(sq m

)


Centre Name State Development Type Current

Status

Total

sqm

Completion

Quarter

Collins Square VIC New Under


Australia On Collins VIC Full Refurbish Under


170 Brisbane QLD Full Refurbish Under

Construction 8,150 Mar-16

York and George NSW New Under

Construction 4,947 Jun-18

Picadilly Arcade WA Full Refurbish DA Approved 2,000 Mar-18

Gateway Plaza

Podium NSW Full Refurbish DA Approved 1,929 Dec-17

-10%

-5%

0%

5%

10%

15%

20%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

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20

11

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12

20

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20

14

20

15

Retail Sales

Rents - Prime CBD

MARKETVIEW


AUSTRALIA RETAIL

CBD Retail

Figure 25: Prime CBD Retail Key Stats


RENT GROWTH MODERATING

HIGHER MARGINS ALLOW SUSTAINABLY

HIGHER OCCUPANCY COSTS

YIELD COMPRESSION CONTINUES

Figure 26: CBD Retail Transactions by State

Figure 27: Average National CBD Retail Prime Yield



0

200

400

600

800

1,000

1,200

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

YTD

Annual Sale

s V

olu

me (

$m

)

NSW VIC QLD

SA WA ACT

3%

5%

7%

9%

11%

Sep-00

Sep-01

Sep-02

Sep-03

Sep-04

Sep-05

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Sep-12

Sep-13

Sep-14

Sep-15

Yie

lds (

%)

Property Grade: Super Prime CBD Prime CBD Secondary

Capital Value


Change

Ann %

NSW 3,488$ 10.7% 5.63% -68 23.9%

VIC 3,769$ 9.7% 4.93% -43 19.3%

QLD 3,155$ 0.0% 7.38% 0 0.0%

WA 3,317$ 9.7% 6.75% -50 17.8%

SA 2,333$ 0.0% 6.50% -50 7.7%

Aust 2,782$ 6.0% 6.40% -35 14.2%


sq m) Yield

MARKETVIEW

HOUSEHOLD RETAIL TRADE REMAINS

STRONG

TENANT DIVERSIFICATION

STRONG SUPPLY BEFORE EASING IN 2017


AUSTRALIA RETAIL

Figure 29: Large Format Retail Supply by State


Figure 28: Large Format Retail Rents and Household Goods Sales

Figure 30: Examples from Large Format Retail Supply Pipeline




Type Current Status

Total

sqm

Completion

Quarter

Masters and Bulky

Goods Nowra NSW New

Under

Construction 13,134 Sep-16

1256 Armadale

Road Armadale WA New

Under

Construction 11,817 Mar-16

Rocklea

Homemaker Centre VIC New

Under

Construction 5,790 Sep-16

Harvey Norman

and Bulky Goods,

Port Lincoln

SA New Under


Jindalee

Homemaker Centre QLD Extension

Under


Large Format Retail

(100,000)

0

100,000

200,000

300,000

400,000

500,000

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Reta

il S

upply

(sq m

)


-5%

0%

5%

10%

15%

20%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Aust - Household Goods Sales

Large Format Retail Rents

MARKETVIEW


AUSTRALIA RETAIL

Large Format Retail

BUYER PROFILE SHIFT

YIELDS SHARPEN FURTHER

•

•

Figure 31: Large Format Retail Prime Rent Growth

Figure 33: Average National Large Format Retail Prime Yield

Figure 32: Large Format Retail Transactions by State




0

200

400

600

800

1,000

1,200

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

YTD

Annual Sale

s V

olu

me (

$m

)

NSW VIC QLD

SA WA ACT

Capital Value


Change

Ann %

NSW 381$ 5.1% 8.28% -80 15.2%

VIC 244$ -0.7% 8.30% -56 6.0%

QLD 218$ 4.8% 9.38% -75 13.2%

WA 225$ 4.7% 8.38% -13 6.2%

SA 202$ 2.5% 8.33% -65 10.5%

Aust 238$ 3.0% 8.51% -48 9.3%


sq m) Yield

4%

5%

6%

7%

8%

9%

10%

11%

Sep-00

Sep-01

Sep-02

Sep-03

Sep-04

Sep-05

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Sep-12

Sep-13

Sep-14

Sep-15

Yie

lds (

%)

MARKETVIEW


AUSTRALIA RETAIL

Source: CBRE, RCA, Q3 2015.

* Note: Table sorted by sale price in descending order.

Figure 34: Sales Transactions over $10m in Q3 2015

Building Name Suburb State Retail Type Sale Price ($m) Initial Yield (%) Sale Date

Westfield Strathpine Strathpine Queensland Sub Regional $209.00 Sep-15

Jam Factory South Yarra Victoria Sub Regional $165.00 Sep-15

Stud Park Shopping Centre Rowville Victoria Sub Regional $154.00 6.00% Sep-15

Spencer Outlet Centre Docklands Victoria CBD $125.00 5.20% Jul-15

Bass Hill Plaza Bass Hill New South Wales Sub Regional $90.00 6.00% Sep-15

Centro Goulburn Goulburn New South Wales Sub Regional $67.00 6.80% Aug-15

Sunshine Homemaker

Centre Maroochydore Queensland Large Format $62.00 9.00% Jul-15

Centro Goulburn Goulburn New South Wales Sub Regional $59.50 Aug-15

Lutwyche City Lutwyche Queensland Neighbourhood $48.80 13.50% Aug-15

Supa Centa Tuggerah Tuggerah New South Wales Large Format $45.00 Jul-15

Sunbury Square Shopping

Centre Sunbury Victoria Neighbourhood $40.00 Sep-15

Kings Cross Centre Darlinghurst New South Wales Neighbourhood $37.30 6.90% Aug-15

Centro Westside Broken Hill New South Wales Sub Regional $33.70 Aug-15

Centro Westside Broken Hill New South Wales Sub Regional $33.70 10.10% Aug-15

Bracken Ridge Plaza Bracken Ridge Queensland Neighbourhood $29.00 7.02% Jul-15

Geraldton Homemaker

Centre Geraldton Western Australia Large Format $27.30 Sep-15

Woolworths Marketplace Albany Creek Queensland Neighbourhood $26.10 6.11% Jul-15

319-325 Swanston Street Melbourne Victoria CBD $26.00 3.90% Jul-15

Woolworths Casula Casula New South Wales Neighbourhood $25.80 5.10% Sep-15

Westpac Chatswood Chatswood New South Wales Strip $25.00 3.90% Jul-15

Griffin Plaza Canberra New South Wales Neighbourhood $23.50 6.90% Aug-15

Chisholm Village Shopping

Centre Chisholm Australian Capital Territory Neighbourhood $22.00 7.80% Sep-15

227-229 Forest Rd Hurstville New South Wales Strip $18.80 4.00% Sep-15

Bay Central Shopping

Centre Hervey Bay Queensland Sub Regional $17.50 Aug-15

Lutwyche City Lutwyche Queensland Neighbourhood $16.30 13.50% Aug-15

123 Swanston Street,

Melbourne Melbourne Victoria CBD $15.80 2.77% Jul-15

House and Home South Nowra New South Wales Large Format $15.30 8.90% Aug-15

Bell Central Shopping

Centre Mudgeeraba Queensland Neighbourhood $13.50 8.40% Sep-15

Champion Drive Shopping

Centre Seville Grove Western Australia Neighbourhood $13.50 Jul-15

434 Oxford Street Bondi Junction New South Wales Strip $13.40 4.90% Sep-15

16 Collins Street Melbourne Victoria CBD $12.30 1.30% Sep-15

Valley View Shopping

Centre Valley View South Australia Neighbourhood $12.30 7.85% Aug-15

338 Queen Street Melbourne Victoria CBD $12.00 Aug-15

61 Mabo Blvd Gungahlin Australian Capital Territory Stand Alone $11.70 6.50% Aug-15

332 Victoria Rd Gladesville New South Wales Stand Alone $11.50 4.60% Aug-15

Divercity (18 shops on G/F) Waterloo New South Wales Strip $11.50 Aug-15

Dan Murphy's Queanbeyan Australian Capital Territory Stand Alone $11.30 Aug-15

Tamborine Mountain

Shopping Square Mount Tamborine Queensland Neighbourhood $11.30 7.56% Aug-15

180 Bay St Port Melbourne Victoria Strip $11.20 Sep-15

293 Doncaster Rd Balwyn North Victoria Strip $11.10 3.90% Sep-15

200 Grand Avenue Forest Lake Queensland Neighbourhood $11.00 9.50% Sep-15

Bunnings Swan Hill Swan Hill Victoria Large Format $11.00 5.10% Jul-15

1155-1161 High St Armadale Victoria Strip $10.60 Aug-15

12-14 McKillop St Melbourne Victoria CBD $10.00 Sep-15

MARKETVIEW

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy,

we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness.

This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior

written permission of CBRE.

AUSTRALIA RETAIL

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Improving rental growth is on course · MARKETVIEW Q3 2015 AUSTRALIA RETAIL -5%. MARKETVIEW Q3 2015...

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