Is the party over for retail property?
There is a lot of debate within the property investment community about whether the party is over for retail property. Anecdotal evidence of the number of empty shops on your local shopping strip will definitely support this view.
At Perpetual we have a formal arrangement with global property specialist, Jones Lang LaSalle, to provide regular property market research. This is in addition to our bottom up property security selection process.
We recently obtained some interesting research from Jones Lang LaSalle about the outlook for Australian retail property. The research confirms that over the past 15 years, retail property returns (shopping centres) have been the best performing sector in the Australian commercial property market. However the recent tough retail environment has seen retail property returns slip below other commercial property sectors. Re-leasing arrangements, even in the larger centres, is trending towards zero growth, or in some cases, negative.
Jones Lang LaSalle concede that they do not expect the returns for retail property to be as good as they have been for the next decade. However, they do state that many of the attributes that have made retail investment a stable investment in the past, such as limited supply concentration, low vacancy and strong population growth, are all likely to remain in place.
Consequently, on a risk-adjusted basis, valuations in retail property will continue to be supported and compare favourably with other commercial property sectors and other asset classes. If you would like a copy of the research please contact your local Perpetual representative.
This information has been prepared by Perpetual Investment Management Limited (PIML) ABN 18 000 866 535, AFSL 234426. It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. You should consider, with a financial adviser, whether the information is suitable for your circumstances. The views expressed in this article are the opinions of the author at the time of writing and do not constitute a recommendation to act. Any information referenced in the article is believed to be accurate at the time of compilation and is provided by Perpetual in good faith. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor's capital.