Retail property investors should remain alert

Investors and self-managed super funds (SMSFs) with exposure to the retail property market will need to remain vigilant as the sector is expected to go through a significant change, according to specialist commercial property lender, Thinktank.

Thinktank’s analyst, Per Amundsen, warned that despite retail sales growth in November by 0.4 per cent, annual growth of 2.8 per cent was down from 3.6 per cent in October.

South Australia saw flat sales across the sector in November but this was not the case in Western Australia, which grew 0.6 per cent, while Victoria and New South Wales were up small 0.1 per cent and a strong 0.8 per cent, respectively.

Following this, Queensland experienced 0.4 per cent seasonally adjusted growth.

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Investors and SMSFs also had to factor in the fact that the performance varied for the differing retail sectors.

Another indicator showing the potential for volatility of this sector was the Westpac-MI Index of Consumer Sentiment staying in optimistic territory, which rose slightly in December (to 104.4) but the fell again by 4.7 per cent in January to 99.6, just below the “pessimism level”.

“The ongoing weakness of Department Stores and DDS remains the major news for the sector and the outcomes of negotiations with major landlords will be followed closely as the expected downsizing continues,” Amundsen said.

“Retail asset manager Vicinity recently devalued 48 retail centres by a total of $205 million, 26 of which were sub-regionals.”

According to him, both Sydney and Melbourne were approaching the peak of market, with ultra-low yields of four per cent which further confused investors and SMSFs, while Brisbane showed comparable yields of six per cent to seven per cent for sub-regional and neighbourhood centres were also described as being at the peak of the market.

At the same time, Adelaide and Perth remained at the bottom of the market with steady/increasing vacancies and declining rents.