Australia’s 2022 retail property investment unlikely to surpass 2021 levels 

Investments this year are likely to be more “tactical”.

Real estate investments in Australia’s retail property market are likely to be robust in 2022 given the increasing investor confidence in the sector. 

According to JLL, many of the ingredients which drove strong levels of transactions in 2021 still exist in 2022. The capital markets remain supportive in terms of the availability of equity and debt. The value proposition for retail relative to other assets classes remains compelling from a valuation and pricing perspective. 

Here’s more from JLL:

There continues to be new capital seeking to enter the retail sector and a range of institutional owners with major retail portfolios that have a stated strategy to reduce their allocation to the retail sector which will drive activity. However, those strategies progressed in 2021 and some major owners are close to achieving their targets from a retail perspective. 

Transactions in 2022 are likely to be more tactical to consolidate exposure to fewer assets, which offer the best potential for returns through organic growth and value-add mixed-use development schemes.

Surpassing the 2021 record of AUD 13.4 billion will be unlikely in 2022, given 2021 was boosted by a build-up of assets that were planned to be disposed of, held for sale for an extended period subject to market conditions and liquidity, or marketed for sale and withdrawn. Furthermore, the stabilising of retail valuations for major assets and asset value appreciation for smaller assets has alleviated some of the urgency to divest. 

Capital partnering has re-emerged as a major theme with AUD 5.7 billion worth of co-investments and part-share transactions recorded in 2021. Many institutional owners, not just within the retail sector, have stated plans to grow their third-party funds management operations. We anticipate there to be a pipeline of part-share capital partnering opportunities as institutions diversify their exposure to individual assets.

With some indirect investors, which were traditionally seen as more passive capital (i.e., without in-house asset management expertise), now seeking more direct control over the assets they have exposure to, there may be a shift from pooled wholesale funds to direct co-ownership stakes.