Investment sales see $300 milllion in activity for 2017
The Gold Coast economy is showing no signs of slowing, even after the conclusion of the Commonwealth Games in April this year.
There has been strong market activity for retail assets on the Gold Coast, particularly during the second half of 2017. A total of $300 million in retail assets (priced at $5 million and above) sold across the Gold Coast in 2017. The transactions of Coles Pacific Pines and Benowa Village helped achieve these figures.
This trend is set to continue, with two big-ticket items hitting the market this year including The Strand, Coolangatta and Soul Boardwalk, Surfers Paradise.
Colliers International Retail Investment Services National Director Stewart Gilchrist said there were four factors boosting the Gold Coast economy, which would support demand for the retail property sector this year: significant investment infrastructure projects; improved tourism numbers; strong migration and population growth; and strong employment growth.
“New planned residential estates, particularly along the northern Gold Coast corridor, will result in future demand for small neighbourhood and convenience centres to service the growing local catchment area,” Mr Gilchrist said.
“Major multi-million dollar refurbishments to major town centres such as Robina, Pacific Fair, and Chevron Renaissance is testament to owners’ optimistic outlook for the retail sector on the Gold Coast over the short to medium term.
“In addition, opportunities may arise for owners of neighbourhood centres to refurbish their premises in preparation of upcoming competition.”
Queensland-wide, the total sales of retail assets for the 2017 calendar year totalled $2.3 billion which was a 9.5 per cent increase on the $2.1 billion recorded in 2016.
Contributing to the $2.3 billion in 2017 was $726 million of neighbourhood sales representing 32 per cent of the dollar volume of sales.
Warner Marketplace was the largest-priced neighbourhood asset to sell in 2017, selling for $78.4 million to AMP for an initial yield of 5.18 per cent. This sale represented the second tightest neighbourhood yield in Queensland recorded in 2017, said Colliers International researcher Helen Swanson.
The tightest neighbourhood yield recorded in 2017 was 5.08 per cent for Benowas Village which sold for $49.5 million to a private investor.
Other major retail sales to take place were sub- and super-regionals which more recently included:
Kawana Shopping World selling for $215.5 million to ISPT for an initial yield of 5.5 per cent; Grand Plaza Shopping Centre 50 per cent stake sold for circa $200 million; Indooroopilly Shoping Centre selling a 50 per cent stake to AMP for $810 million for an initial yield of 4.25 per cent.
Demand for Queensland’s retail assets has been strong for several years now. “Fierce competition, particularly for neighbourhood centres located in a strong population growth corridor which also possess a long WALE has resulted in yields on average compressing 125 basis points over the last 24 months to December 2017,” Ms Swanson said.
“More recently however, speculation regarding global inflation rising and the spread between risk-free retail assets approaching long-term historical averages suggest that yields may have reached the bottom of the market.
“Additionally, given rental growth expectations for most retail assets in Queensland are currently predicted to be flat over the coming 12 months, investors are becoming more cautious when assessing their investment options.
“Yields for neighbourhood centres as at the March quarter 2018 sit at 5.5 to 7 per cent, softening from 5.35 to 7 per cent recorded in the previous quarter.”
All other retail asset classes recorded no movement in yields over the quarter.
Our predictions suggest for the reasons above that yields are most likely to, on average, stabilise this year, although each sale will be assessed on a case-by-case basis. However, if the right asset emerges for sale, there still could be an anomaly which presents itself and sets a new record in the market.
On a more positive note, one indicator which favours the market, is the limited supply of assets for purchase as well as the future supply pipeline of new retail assets currently planned.
Additionally, population and interstate migration forecasts are currently looking positive, particularly for south-east Queensland.