Shopping centres not dead: Vanessa Rader

Shopping centres remain a vibrant asset class, although they’re continuing to evolve to remain relevant, according to one of Australia's leading commercial property experts.

Ray White Commercial Head of Research Vanessa Rader said that while online retail is providing strong competition to traditional retail, food is one sector where consumers continue to show a strong preference for buying in-store.

“Over the last year, non-food online retailing accounts for 16.5% of all retail sales while food represents just 5.6% after peaking at 7.4% during the pandemic,” she said.

“With a total 10.3% of all retail sales being online and this low food segment (which is our largest retail consumable), the ongoing need for brick-and-mortar retailers, particularly in the food sector, will ensure the continued need for shopping centres anchored by supermarkets.

“So shopping centres are not dead, however, the tenant types which occupy brick-and-mortar retail are certainly changing, with a greater weighting to food and service type industries.”

Retail assets likely to deliver higher yields

During 2022, investors bought and sold over $14.5 billion of retail assets, reflecting strong confidence in this asset class by private and institutional investors, according to Ms Rader.

“Convenience and neighbourhood assets remain in high demand given this attraction to food, often anchored by a supermarket and home to supplementary specialty food retailers,” she said.

"Returns data from MSCI also suggests that sub-regional and neighbourhood centres have outperformed across both capital and income returns over the last year compared to larger major and super regional centres."

Ms Rader said owners of retail assets would be likely to enjoy yield increases in 2023.

That would apply even for owners of assets with leases tied to turnover and rental increases tied to inflation, according to Ms Rader.

“As buyers continue to look towards these assets and our shopping trends still see us visiting these centres and stores, retail is far from dead but our expectations and experiences will continue to evolve,” she said.

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