June 23, 2013-New South Wales’ retail market is positioned to benefit from an upswing in confidence levels, modest improvement in dwelling approvals and increased retail turnover growth, new research shows.
According to CBRE’s Australia Retail Marketview Q1, 2013 report, a more stable economic outlook is helping to boost consumer spending levels, driving modest growth in the NSW retail market as a result.
Despite subdued rental growth in the first three months of the year nationally, sales and investment activity was heightened during the period – particularly in the eastern states.
During Q1, retail sector investment activity lifted 39% in comparison to the same period last year – reaching $1.4 billion over the quarter.
In NSW, retail investments for the year to December 2012 totalled $1.432 billion – the highest nationally. That momentum has stalled in 2013 however, with investments amounting to $151 million during the first quarter of 2013.
CBRE Senior Research Manager Tammy Smith said while investment activity in NSW has been relatively restrained during the first few months of this year, rising consumer sentiment levels were driving an improvement in retail sales statewide.
“Sentiment levels nationally jumped 14 points in the year to April, which has provided a welcome boost to turnover figures – particularly in the eastern markets,” Ms Smith said.
In NSW, retail turnover climbed 3.25% in the year to March 2013 – significantly higher than the 0.23% increase recorded during the same period the year before.
By comparison, WA recorded the highest sales turnover growth with 8.58%, followed by QLD with 5.0%.
“As the economy becomes more stable and the outlook more optimistic, consumers are returning to more favourable spending patterns, which is helping to attract investors, spur new developments and support modest rental growth,” Ms Smith said.
“Improved consumer sentiment levels, supported by a lower interest rate environment, is having a positive impact on the retail market, with relatively high yields and the defensive characteristics of the retail sector underpinning a rise in investment and retail supply,” Ms Smith said.
In quarter one, dwelling approvals increased 13% in NSW, while nationally during the same period, approvals jumped 11%.
CBRE Director of Retail Investments Steve Lerche said the low interest rate environment and more favourable conditions had contributed to a recent recovery in NSW approvals.
“The current climate has contributed to change in sentiment from investors and developers, with them now seeing more value in NSW retail assets,” Mr Lerche said.
In particular, investors are now expanding their portfolios to include sub-regional and neigbourhood centres. Neighbourhood developments currently account for 14% of all retail construction nationally, a trend which is set to continue into next year, increasing to 17% of additional supply.
In NSW, 275,7000sqm of retail space is expected to be completed by December 2013 – rising to 594,800sqm in 2014, before dropping to 210,400sqm the year after.
For Australian/international news or global stories, follow us on Twitter.
About CBRE Group, Inc.
