Australia retail property investment hits a record AUD13.4b in 2021

This is three times higher than 2020 levels.

Australia’s retail property market saw record levels of investment activity in 2021 despite the uncertainties brought about by the pandemic. According to JLL data, total retail investment in the country hit AUD 13.4 billion, nearly three times higher than the AUD 4.7 billion recorded in 2020 and more than 50% above the previous record high of AUD 8.8 billion in 2017. 

Retail investment market conditions reached a key inflection point around October 2021. A series of major transactions above AUD 250 million occurred in 4Q21 which drove the total volume to record high levels. 

Here’s more from JLL:

The recapitalisation of the AMP Capital Retail Trust (ACRT) for AUD 2.205 billion was a major contributor, but there were a further eight transactions in 4Q21 above the AUD 250 million threshold, taking the total for 2021 to 11 transactions above AUD 250 million. Over the prior ten years, there were only four transactions on average (p.a.) above the same threshold. 

The AMP Capital Retail Trust (ACRT) recapitalisation in October 2021 resulted in CBUS, UniSuper and AMP Capital acquiring 50% of Macquarie Centre and 80% of Pacific Fair from ADIA, CPPIB and Resolution Life Group. The fund owned a share in the two assets with a combined value of AUD 2.205 billion. The recapitalised fund subsequently increased its stake in Pacific Fair by acquiring the remaining 20% share from the co-owner, Dexus Wholesale Property Fund (DWPF), for AUD 336.4 million in December 2021. 

The surge in 4Q21 investment reflects a build-up of transaction activity which came to fruition as liquidity for major assets re-opened and confidence returned to the retail sector. Some investors upgraded their view on the retail sector based on the economic recovery continuing to run ahead of expectations, rising levels of community vaccination (reducing the perceived risk of further lockdowns) and stabilising of shopping centre valuations following a correction. 

A wide cross section of major assets sold in the final quarter of 2021, suggesting demand had broadened and was less selective towards sub-sectors and risk profiles for assets above AUD 250 million. The devaluations of individual assets, which came through in 2019 and 2020, generally ranged from -8% for some regional shopping centres through to -35% for others. 

The significant increase in investment and return of core capital to the retail sector, in addition to active syndicator participation, suggests that valuations across the spectrum corrected to a level which was triggering investor engagement and, as a result, liquidity.

New South Wales (AUD 5.2 billion) and Queensland (AUD 4.6 billion) accounted for 73% of national activity, with both markets reaching a record high by a significant margin. While the volume of activity in Victoria (AUD 2.4 billion) was more stock constrained by comparison, 2021 was still the second highest year on record. 

Western Australia recorded sales of AUD 531 million, consistent with the average over the last five years. South Australia recorded a notable increase (+119%) in activity (AUD 656 million), with demand primarily from local private companies, investors, and developers.