2021 is shaping up to be a year of increased investment activity in the Australian and New Zealand retail property markets as the sector progressively recalibrates and stabilises, providing greater performance transparency for investors.
While investors remain cautious, opportunity-led and have a clear flight to quality focus, the relaxation of border restrictions will certainly improve deal flow.
Most activity and demand will continue to centre around the strong performing and highly resilient, food, service, grocery anchored, non-discretionary, neighbourhood centre markets and long WALE, freestanding retail assets underpinned by strong covenants.
These assets have been the real standout performers during and coming out of this COVID period and remain highly sought by major institutional owners, offshore capital and high net worth and private investment groups.
The large format and factory outlet markets have also rebounded, but they remain tightly held and highly sought after. The opportunity for Australians and New Zealanders to travel abroad will remain limited for much of the first half of 2021 at least and, as a result, more retail spending will occur domestically, one of the factors that drove strong growth in retail turnover in 2020.
Urban retail asset regeneration will be the big mover, with multiple domestic and offshore groups looking to acquire or joint venture with existing owners for land rich retail assets offering strong demographic characteristics. Assets located on transport hubs which offer superfluous retail space, discounted pricing and those which present major mixed-use development opportunities will be particularly sought after.
There is also a resurgence in demand for super prime, core CBD retail assets, despite workforce population and international tourism challenges, given the tightly held nature of this sector and the one-off opportunities to secure high quality, trophy assets.