CBRE’s Head of Research, Australia, Bradley Speers said; “2020 will be a challenging year for the retail sector as continued headwinds impact retailers and landlords alike. However, the changing retail landscape presents an opportunity for investors, landlords and retailers to transform shopping centres into mixed use hubs to futureproof against continued change.”
A key shift will be the emergence of non-traditional retail uses in shopping centres – examples including Catch of the Day opening a physical retail presence in Target at Melbourne’s Highpoint Shopping Centre and Australia’s first Esports arena filling the vacated Topshop box at Melbourne’s Emporium, offering more than 10 screens broadcasting live tournaments, 160 esport gaming PCs and a tavern.
CBRE’s Head of Retail Advisory, Graeme Wakefield, said; “As retailers continue to rationalise their physical store footprint, it is expected 2020 will see more unique retail spaces open that will provide increased foot traffic, especially from younger, tech savvy consumers. Increased pressure on household incomes may also see owners reduce their reliance on food and beverage retailers and instead look to online retailer pop ups and entertainment.”
Mr Wakefield added; “Retailers will also need to ensure they effectively link their digital and physical store strategies to ensure they keep pace in a market which is increasingly geared towards lifestyle purchases and services. 2020 is shaping up to be a year of opportunity and change and retailers who are focused on creating an experience will continue to grow and thrive.”
The shifting retail landscape is also influencing the industrial & logistics sector, with e-commerce helping to drive growth across the Australian market.
Pressure on industrial land supply and continued investor demand will see rents continue to rise and yields compress further, with CBRE forecasting that 2020 will be the year that super prime yields drop below 4% in Sydney.
Rising rents will also likely ensure the financial viability of the country’s first multi-storey warehouse developments – with South Sydney leading the pack.
CBRE’s Market Outlook report includes forecasts for the hotel, office and residential sectors, and geographic forecasts for Canberra, Melbourne, Sydney, Brisbane, Perth and Adelaide.
Key take outs in addition to the above include:
•Bushfires and the coronavirus will dent the sector in the first half of the year, with lower Chinese visitation.
•The standard of accommodation is set to improve in 2020 with approximately 2,600 high-end keys to be delivered, equating to 5% of existing high-end supply.
•Over the past 10 years, dwelling prices have outgrown wage inflation in Sydney and Melbourne only. Affordability is in issue in these two cities only.
•Price growth has returned to residential markets and this will continue in 2020
•Brisbane now has the lowest level of residential vacancy. Based on the level of dwelling approvals and construction starts, CBRE expects Brisbane to have the highest risk of being undersupplied by 2021. This should support stronger price growth in this market.
•Perth led the country for prime net effective rental growth in 2019 and this will continue over the next few years.
•After several stellar years, rents will stabilise in Sydney and Melbourne as new supply starts to filter through. Both markets are expected historic increases in supply; however strong demand will temper vacancy increases
•While pricing levels are at historic highs for office assets, the low cost of debt and strong investor appetite is likely to lead to further yield compression in 2020, particularly if there is another interest rate cut
•Low retail trade growth appears to be the new normal.
•CBRE estimates that around 40% of all retailer insolvencies in Australia over the past five years have been clothing retailers.
•Large format retail will benefit from increased sales volumes in the residential sector.
Industrial & Logistics
•2020 will see the industrial sector continue to perform strongly with investors looking to reweight portfolios by increasing allocations towards industrial and logistics.
•The industrial economy is in recession due to the decline in residential construction. However, this has had little impact on tenant demand
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