Victorian retail market at highest level since GFC: CBRE

Investment activity in Victoria's retail market has soared to the highest level since the global financial crisis, a new CBRE report has revealed.

Strong buyer interest from international investors and institutional groups saw the state's retail market emerge as the epicenter of investment activity, with CBRE's Australia MarketView report showing Victoria accounting for 46% of all national transactions in the second quarter of 2013.

"Over the first half of 2013, retail investment levels were at a five-year high, with the low interest rate environment and strong performance of retail assets – particular non-discretionary - seeing investors show renewed levels of confidence in both regional and CBD markets,” said CBRE director of Victorian retail investments Mark Wizel.

The spike in investment activity comes despite a broader trend of weak retail trading conditions across the country.

At the centre of that buying activity was Victoria’s neighbourhood shopping centre market, with Mr Wizel citing a wide range of private and corporate acquisitions such as ISPT’s purchase of 75% interests in over 20 Coles developed properties and SCA Property Group’s acquisition of the Lascorp portfolio.

Partly driving that higher investment activity in neighbourhood shopping centres was a shift in consumer spending towards food retailing.

CBRE Senior Retail Research Manager Tammy Smith said the change in investor sentiment was the result of an economic shift and the move towards non-discretionary spending.

The report showed that while Victoria’s retail turnover figures in the 12 months to June 2013 were below the national average – recording no growth over the period – supply levels and rents have continued to trend upwards.

In the 12 months to June, metropolitan regional rents rose to between $1,385 per square metre and $2,615 per square metre, CBRE figures showed, while neighbourhood centres benefited from the large food based tenant mix to record a 3.1% lift in rents annually.

However, the large discretionary spend exposure of sub-regional centres, saw rents drop 4.1% to sit between $598 per square metre and $1,317 per square metre.

The CBRE report also indicated that the Melbourne CBD market could be the next hub of invesment activity.

“We believe that for the first time in four years, confidence within the Melbourne CBD tenancy market has exceeded that of the investment market – ultimately this means that over the coming months the investment market will respond in a positive manner,” said Mr Wizel.

"Asian investment within the Melbourne CBD, and specifically for retail properties, is currently at unprecedented levels, with properties ranging in value from $2 million to $100 million attracting interest from both Asian investors living locally, as well as offshore-based investors looking to deploy funds to the state’s capital city.”

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