Month in Review April 2021 The Month in Review identifies the latest movements and trends for property markets across Australia - Herron Todd White
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Month in Review April 2021 The Month in Review identifies the latest movements and trends for property markets across Australia.
Contents
Click on
any state or
page number
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access
A message from our CEO 3
Feature –First homeowner options 4
Commercial - Retail 5
Australia’s retail investment sweet spot? 6
New South Wales 9
Victoria 12
Queensland 15
South Australia 19
Western Australia 20
Northern Territory 21
Australian Capital Territory 22
Residential 23
New South Wales 26
Victoria 40
Queensland 47
South Australia 55
Western Australia 58
Northern Territory 62
Australian Capital Territory 64
Tasmania 66
Rural 67
Disclaimer
This publication presents a generalised overview regarding the state of Australian property markets using property
market risk-ranking scales. It is not a guide to individual property assessments and should not be relied upon.
Herron Todd White accepts no responsibility for any reliance placed on the commentary and generalised
information. Contact Herron Todd White to obtain formal, specific property advice on any matters of interest
arising from this publication.
All rights reserved. This report can not be reproduced or distributed without written permission of Herron Todd White.
A message from our CEO
Month in Review
April 2021
Last year many experts were warning the market to prepare for a prolonged downturn
These opinions were based on reasonable Comprehensive coverage and a depth of Among the stories this month are:
evidence. The pandemic was a global event understanding make Herron Todd White a standout
◗ Sydney – Opportunities are revealed for first
without peer in the modern era – and the initial among Australia’s professional property firms.
homebuyers throughout the region;
economic ramifications were both swift and
In our commercial section this month, we discuss
painful. ◗ Brisbane – first homebuyers see stiff
the retail sector.
competition from investors;
But in 2021, we have now seen one of the nation’s
The feature article sees two of our leading
strongest periods of price growth across multiple ◗ Perth – here’s six top tips for Perth first
commercial valuers identify a retail investment
locations. Talk to stakeholders in the property homebuyers entering the market.
‘sweet spot’ that’s surfaced during the past by
sphere and you’d be hard pressed to find one who
year. In addition, our rural teams have delivered an
isn’t surprised by the rebound.
unparalleled assessment of regional property,
COMMERCIAL
Our main commercial submissions are expert
While the uptick might be attributed to while also outlining their markets most surprising
predictions on how retail property will likely
CEO
government intervention and our suppression of events during the past year.
perform through to the end of 2021.
the virus, it also demonstrates an undeniable link
Please enjoy this latest addition of Month In Review.
between Australian’s and their property. Some key stories include:
Gary Brinkworth
We find security in real estate – both in terms of ◗ Sydney – CBD retail is in for a challenging
shelter and investment. second-half;
The turnaround also demonstrates property ◗ Adelaide – positive signs for a bounce back in
markets can change rapidly and dramatically. retail trading this year; and
In this environment having the right advice is key. ◗ Melbourne – secondary retail investment
Because Herron Todd White offers nationwide struggles, while prime opportunities do well.
coverage across all property sectors, we have
In our residential submission this month, we delve
experienced professionals particular to your
into the first homebuyer market and ask where
needs. Our valuers also have intimate local
the opportunities are for those looking to make
knowledge of their specialty locations.
their initial purchase.
Talk to stakeholders in the property sphere and you’d be hard
pressed to find one who isn’t surprised by the rebound.
3
First homeowner options
Month in Review
April 2021
Our national affinity for property ownership is so ingrained, it’s become a generational rite of passage.
Perhaps it’s our relative youth as a nation. Unlike It was also a handy time for saving a deposit. In commercial this month, we chat about retail and
old-world continents such as Europe or the USA, Youngsters headed home in droves during discuss what the remainder of 2021 has in store
the idea that an Aussie would be a lifetime renter lockdown, and any plans for a gap year overseas for this sector. In addition, our feature article looks
by choice feels somewhat unusual. were well and truly quashed. at whether entry-level retail investment remains a
viable option in these trying times.
After all, this is our wide brown land with boundless In addition, extraordinarily low interest rates
plains to share. We have plenty of dirt to go made it even easier to service a loan. In fact, Finally, the rural crew has stepped up once more.
around, so why wouldn’t it be possible for every given how red hot the rental market has become, Along with an excellent wrap on the sector,
person who wants to own a piece of the country to it’s more financially savvy to buy a home than they’ve delivered details on what’s surprised them
grab their own slice? rent in many circumstances. most in rural property markets over the past six
to 12 months. It’s a fascinating take on primary
Real estate is also an aspirational asset. After But something has changed again of late. The
production real estate across the nation.
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locking down that first home, there is a well- extraordinary uptick in demand and tightening
FEATURE
established pattern of upgrading and downsizing of supply around residential real estate means There it is – another issue ready for your
that will see you through the path earlier competition for property is running at a pace – and consumption. But don’t just stop at these pages.
generations have already established. first homeowners are struggling to keep up with There’s a Herron Todd White expert with the skills,
emerging investor buyers. experience and know how to tackle any of your
Yes – the sense of security that comes with home
property needs – all you need to do is call.
ownership is quite something – but in recent years, This is where we come in. Our residential teams
things became slightly more dire – particularly in around the nation have tackled this month’s task
our big capital cities. The value of property seemed and revealed where first homeowners are most
to rise ever higher, and youngsters were finding active. In addition, our teams have highlighted
it tough putting together enough deposit and opportunities for first time buyers, with many
securing a home. suburbs offering great long-term potential among
these pages.
Then in 2020’s pandemic year, an extraordinary
mix of events delivered opportunity to first It’s invaluable advice for anyone wanting to
homebuyers. A raft of political support added take their first steps on the property ladder.
to already established grants and stimulus to
help first timers get a foot in the proverbial door.
The extraordinary uptick in demand and tightening of supply around residential real estate
means competition for property is running at a pace – and first homeowners are struggling
to keep up with emerging investor buyers.
4
Commercial April 2021
SPECIAL REPORT SPECIAL REPORT SPECIAL REPORT SPECIAL REPORT SPECIAL REPORT SPECIAL REPORT SPECIAL REPORT
Australia’s retail investment
Month in Review
April 2021
sweet spot?
To poorly misquote Mark Twain, reports of the retail sector’s
death have been greatly exaggerated.
COMMERCIAL
We have heard for years now that Australian retail White Brisbane, said this price segment has seen
has been struggling under the weight of challenges. impressive results.
From online shopping through to global pandemics,
“Up to $5 million will buy small strip retail buildings
it seemed brick-and-mortar retail was being dealt
or larger single-tenant retail spaces, and this is a
plenty of tough hands.
sweet spot at the moment.
But generalising about an entire market is simply
“It’ll be a little six shop centre in the suburbs that’s
ignoring its nuances. While one location or property
predominantly food orientated, anchored by a small
type might be struggling, another will be soaring.
supermarket. They’re all about convenience and
This is the case in the retail sector where sub-$5 that sort of business didn’t really slow down during
million investment has proved both resilient and COVID. You don’t buy your fish and chips online, but
TERRY MUNN
lucrative during a time of general upheaval. you do use Uber Eats and they go and pick them up
Commercial Director at Herron
from the shops.
Terry Munn, Commercial Director at Herron Todd Todd White Brisbane
6
SPECIAL REPORT SPECIAL REPORT SPECIAL REPORT SPECIAL REPORT SPECIAL REPORT SPECIAL REPORT SPECIAL REPORT
understanding of the rents that are currently being Month in Review
“Investors can buy a strip shop at a yield of 5%, and fund it at paid by tenants and how they relate to market April 2021
2% so it’s cashflow positive – but I don’t see too many novice rents. The problem is there could potentially be
investors calculating the downside risk properly.” a difference between passing rents and market
rents, and I don’t think the market is taking into
consideration that potential difference.
“In fact, we’ve seen evidence of some major restaurants
takeaway operations seeing up to a 30 per cent leased to a “You could have rents that were set in a stronger
increase in turnover during COVID.” national tenant market that have been subject to fixed increases.
are very keen, So, the passing rent now is significantly above
Mr Munn said most COVID-induced rent relief had
with yield the prevailing market rental rate that would be
washed through the market and activity had now
generally falling achieved if that tenant vacates and you put the
stabilised.
between 3.5% space to market. If the current tenant defaults, or
“Rents aren’t being pushed up by landlords at the and 5.0%. doesn’t renew the lease, and you have to re-lease at
moment. It’s just all about retaining the cashflow a far lower rent, that has significant repercussions.”
Greg Mullins,
rather than trying to rock the boat too much and
commercial Mr Mullins said buyers must also understand the
risk getting one or two vacancies.”
valuer at strength of the tenants in place before purchasing.
The relative strength of the market has been Herron Todd
COMMERCIAL
“Maybe ensuring those leases have bank
reflected in recent sales according to Mr Munn, with White Perth,
GREG MULLINS guarantees or some form of security for an
limited supply and huge demand at present. agreed that
Commercial Valuer at Herron adequate amount of time. Make sure you also
demand for
“We probably analyse in Brisbane, the Gold Coast Todd White Perth understand the tenant profile.”
retail at this
and Sunshine Coast around 20 sales a year, so
price point Finally, Mr Mullins said buyers should seek
there’s not a lot of volume.
is incredibly strong, but he believes much of the properties with future redevelopment opportunities.
“There was one sale at Sunnybank a couple of uptick is being driven by cheap credit which actually
“A lot of these inner or near city strip retail
months ago that reflects around a 4.6% yield, and increases longer-term risk for inexperienced
properties have high underlying land values and
a year ago that probably would have been between investors.
represent medium to long term redevelopment
a 5.5% and 6.5% yield.”
“I think the market exuberance is being driven by prospects.
Mr Munn said unearthing opportunities takes work, how cheap debt funding is and the lack of return
“If you have something that has some flexibility
but they’re out there. on an alternative asset class. Investors can buy a
going forward, that’s worth considering. If in 10
strip shop at a yield of 5%, and fund it at 2% so it’s
“You’ll find some assets – perhaps something that’s years’ time the building’s older, but the highest
cashflow positive – but I don’t see too many novice
been poorly managed or in poor physical condition and best use may be for a mixed-use apartment
investors calculating the downside risk properly.”
– that can be an opportunity to add value. development, that makes for a good investment
Mr Mullins expects strength in this market to opportunity.
“I think yields will continue to compress in the
continue as long as interest rates remain at their
coming year – we’ll see more yields with a five in “Finding an asset that has future redevelopment
current historical lows, but he has some important
front of them (or sub five) whereas, previously they potential is an added benefit on top of the fact that
advice for those looking to purchase.
were pretty much all between 5.5% and 7.5%.” you’re able to derive a reasonable income from the
“The absolute key thing people need to get is an existing improvements.”
Stand alone, fast food dine in and drive through
7
National Property Clock: Retail
Month in Review
April 2021
Entries coloured purple indicate positional change from last month.
Central Coast
South East NSW
PEAK OF
MARKET
Cairns Gold Coast
Sunshine Coast Approaching Starting to Geelong Melbourne
Peak of Market Decline Gippsland Mid North Coast
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Balina/Byron Bay Burnie-Devonport Canberra
Darwin
Ballarat Ipswich RISING DECLINING Echuca
Bendigo Launceston MARKET MARKET Sydney
Brisbane Newcastle
Toowoomba
Adelaide Lismore Geraldton
Adelaide Hills Mackay Start of Approaching Hobart
Recovery Bottom of Market
Barossa Valley Mildura Illawarra
South West WA
BOTTOM OF
MARKET
Alice Springs Hervey Bay
Bundaberg Perth
Coffs Harbour Rockhampton
Liability limited by a scheme approved under Professional Standards Legislation. Emerald Townsville
This report is not intended to be comprehensive or render advice and neither Gladstone
Herron Todd White nor any persons involved in the preparation of this report
accept any form of liability for its contents.
8
New South Wales
Month in Review
April 2021
Overview locations relied on office workers in the immediate
Navigating retail property investment continues vicinity for trade. The impact of this is being felt by
to be a challenge. The changing face of this space landlords and tenants. We anticipate this will have a
means those who participate in the sector need to strong negative impact on capital values this year.
stay right up to date with market movement.
It is our view that investors should avoid assets that
This month, our retail specialists provide opinions have poor lease covenants, lack a good trade base
on which direction their markets will head as we or exposure and areas that are oversupplied with
move through the rest of 2021. retail, particularly in areas that have high density
residential units with ground floor retail. Softer
Sydney yields compared to other commercial property
The impact of COVID-19 has been significant for sectors may appeal to some investors and may help Wollongong Source: realcommercial.com.au
the retail market in Sydney. Some areas of Sydney support a recovery in retail transactions in 2021.
COMMERCIAL
have felt the impact more than others, but overall The red flag in retail at present is the fallout from
We think the next twelve months will see continued
we are experiencing subdued conditions. Looking the removal of the Commonwealth government’s
lack of interest in retail. Demand from investors
ahead, we do not expect conditions to improve any JobKeeper subsidy on 28 March 2021 with many
will be the main driver of any market movement.
time soon. economists forecasting significant business
The outlook for retail in Sydney overall remains
closures and job losses as a result. The removal
Local neighbourhood retail areas are expected to negative, with only a few rays of sunshine.
of other various relief and deferral schemes
fare better than other retail locations this year.
Angeline Mann covering primarily rental payments and land tax
Whilst still experiencing difficulties with lower rental Commercial Director obligations is also forecast to impact on the retail
income and higher vacancy rates, these local strips
sector. There is concern about the impact this
have made somewhat of a comeback with more
Wollongong will have on vacancy rates, particularly in large
activity in both the leasing and sale markets.
The COVID-19 pandemic fast tracked some of CBDs dominated by office buildings and locations
The Sydney CBD remains an issue for the retail the trends that have been evident in the retail reliant on international tourism. While roll out of
market. Many shops have not reopened as office industry for some time as a result of online the vaccine, relaxation of COVID-19 restrictions and
workers are still reluctant to return to the city and retailing and changing consumer spending habits. opening of state and territory borders will soften
the usual trade has not yet bounced back. The There is no looking back as the broader sector the blow, we are expecting to see an immediate
worst impacted seem to be retail assets in arcades has fundamentally changed and is well set on its negative impression on the sector.
and locations that lack exposure. Pre-COVID, these current path.
Certain categories within the retail industry will
continue to perform well with bulky goods and
Softer yields compared to other commercial property sectors neighbourhood and convenience shopping centre
may appeal to some investors and may help support a recovery asset classes in demand and a forecast for 2021
of yield compression for well-located complexes
in retail transactions in 2021.
9
with attractive tenancy and lease expiry profiles. suburban food premises remain in demand as a exodus from the cities which is increasing the Month in Review
Throughout the pandemic, we have seen very result. Rental levels have remained broadly stable number of people frequenting retail areas and April 2021
strong demand for service stations, service across most neighbourhood centres. improving businesses, particularly food related.
centres and fast food assets reflecting long
So while we do need to be wary of what may The low interest rate market is creating a surge
lease terms. Given ongoing uncertainty and the
happen in the local retail market with the end of in demand from investors looking for superior
defensive nature of such assets, we expect to see
JobKeeper in sight, it’s not all doom and gloom, returns and future capital growth while owner-
this level of demand continue throughout
with some suburban retailers flourishing in the new occupiers are looking to secure their business and
the year.
normal marketplace. protect themselves from rental increases. While
Scott Russell this effect is strongest in coastal localities, the
Director Scott Beker
Property Valuer more slightly inland areas of the north coast are
also benefiting.
Newcastle/Hunter Region Lismore
We certainly see some potential volatility in the Yields and returns sub six per cent are becoming
The retail sector is likely the most adversely
retail space in the short term. With many cafes more prevalent.
impacted as a result of COVID-19. The initial
and restaurants not yet running at full capacity Analysed
stages of the pandemic saw ghost town situations
and the end of JobKeeper – which around a Sale Sale Market
for most retail areas with subsequent rental Address Date Price Yield (%)
million Australians are still receiving at the time of
holidays and rental discounts occurring across Jonson St, Byron
writing - we see a real potential for some upward
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16/12/2020 $3,285,000 3.65
the majority of tenancies. The lifeline in the form Bay, NSW, 2481
pressure on vacancy in the short term. There is
of JobKeeper allowed many businesses to remain Byron Street,
some positive news though; rather than focusing Bangalow, NSW, 21/12/2020 $2,000,000 4.22
marginally afloat. As the COVID-19 restrictions
on the risk and bad news we can highlight 2479
started to be wound back, there was a steady
that some small suburban retail premises are River St, Ballina,
strengthening in the retail market led by food and NSW, 2478
05/02/2021 $710,000 4.41
experiencing firm demand.
coffee-based retailers and progressively to more
Oak Street, Evans
Retail businesses appear to have learned that general retail. 08/12/2020 $400,000 2.69
Head, NSW, 2473
people still get out and shop during lockdowns, Coldstream Street,
The retail economy is showing signs of recovery 03/03/2021 $625,000 5.07
albeit that some shoppers avoid enclosed Yamba, NSW, 2464
with what appear to be busier local streets and
shopping centres. As an example, the retail Centre St, Casino,
05/11/2020 $1,105,000 5.08
more activity in local central business districts, NSW, 2470
commercial strip of Beaumont Street, Hamilton,
particularly in regional and suburban localities. The Union St, Maclean,
1.5 kilometres west of the Newcastle CBD, is a 21/01/2021 $680,000 5.95
commentary around capital city CBD localities is NSW, 2463
popular inner suburban eat street with a mix
less complimentary. Daley St,
of cafes, cake shops, restaurants and licenced Alstonville, NSW, 01/11/2020 $725,000 5.42
premises. This precinct had 23 vacancies as at The retail market has continued a relatively strong 2477
July 2020 and has seven vacancies at the time recovery. While its strength and improving value
This trend appears to be strengthening and as the
of writing. Agents indicate a distinct confidence levels are not as significant as industrial and are a
economy continues to strengthen and interest rates
from small business owners at present, willing to long way below the stratospheric increases being
remain low, it is likely to continue. However, we
make decisions to secure premises and continue seen in the residential sphere, it is not a market to
caution that this does not appear to be across all
or expand small businesses. Certain local food be ignored or underestimated.
segments and it is likely that non-coastal localities
businesses not tied closely to office occupancy
Our coastal localities are benefiting from the will remain less likely to follow as their retail sectors
are indicating strong business conditions;
increase in regional tourism and the perceived are more fragile with lower rental demand, higher
10months. Softening of the retail activity will also incentives are normal for any new leases. The most Month in Review
reduce demand from owner-occupiers as they are recent retail CBD lettings, of which there have been April 2021
likely to see the signals prior to investors. few, display a decrease in the previously established
rental levels. The high vacancy rate for main street
Each retail area needs to be considered on its own
retail shops has prevailed for a sustained period.
merits.
There have been a few recent retail property sales
Ultimately, local retail economic activity needs
of shops subject to lease in the range of six to
to be considered when gauging likely value
seven per cent net yield.
movements. Some key aspects more locally:
The retail market within the local regional shopping
1. Is there growth in the local population or
centres appears to be more positive with high
upward trend in tourism?
Lismore Source: realcommercial.com.au occupancy rates. Local businesses appear to
2. Is the local economy growing or stable? be recovering from the effects of COVID-19 with
vacancies and stable rents. Further the asset increasing trade activity.
3. Is there an increasing vacancy rate in retail
appears to need to fit within one of two categories:
premises? Future expectations for the retail market include
1. Good stable tenant, preferably with good a continuation of rental sensitivity and firm yields
4. Are rents increasing, stable or declining?
remaining lease term (with national tenants for property that is strongly leased as investors
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most sought after). 5. Is there a possible or proposed increase in analyse comparative yield options.
supply from development projects, either in
2. Lower end market position for the locality, Vacant retail property will most likely experience
the local retail sector or nearby localities?
suitable for owner occupation. restricted demand with the prospects of sale linked
Ultimately increasing residential values does not to the owner-occupier market.
Expectations are that the current tightening of
necessarily flow through to retail values, however
yields and upper pressure on retail values will The year ahead should be more positive with
increasing permanent resident populations
continue during 2021 as supply remains limited and flow on effects from the Pacific Highway bypass
and improving tourism numbers may lead to
demand drives the market. construction phase which is due to commence and
a stronger retail sector and a more balanced
continuation of strong domestic tourism offering
COVID-19 has driven a trend to shop locally and local economy which will flow through to an
increased opportunity for retail business.
has also increased regional tourism which have improvement in values.
been positive for the retail sector. The population is Ken Potter
The uncertainty continues although there have Director
rediscovering local businesses and with additional
been positive signs and expectations are that the
government incentives, increased local spending is
improvements are likely to be sustained over the
driving a renewed local retail sector.
next six to twelve months.
The most obvious risk in the short to medium Martin Gooley
term is the removal or softening of the federal Valuer
government stimulus which may impact business
owners and as such, in areas where rents have Coffs Harbour
been driven upwards, may impact sustainability The Coffs Harbour retail market within the CBD
of the rental increases. The risk of a slowing retail is slow with a continuation of high vacancy rates.
economy may not become readily visible for six The market is displaying price sensitivity and lease
11Victoria
Month in Review
April 2021
Melbourne There are currently significantly reduced levels of leasing
Since March 2020, the Coronavirus (COVID-19)
pandemic has had a significant impact on the demand from prospective retail tenants.
Melbourne economy and the retail property market.
tenants who operate essential services and had With the continued economic and job uncertainty it
Throughout most of 2020 there were limited major
strong turnover volumes during the pandemic is likely there will be reduced levels of discretionary
sales of retail property. With the implementation
period, such as supermarkets and liquor stores, spending during 2021. Once the government
of Stage 3 restrictions in early July 2020, public
continued to attract demand from purchasers when support measures such as the JobKeeper
on-site auctions in metropolitan Melbourne were
available for sale. allowance expire at the end of March 2021, there
banned and forced to move back online. During
could be increased unemployment and further
Stage 4 restrictions, in-person property inspections There are currently significantly reduced levels of
reduction in wage levels. Non-discretionary
were also banned. Discussions with a number of leasing demand from prospective retail tenants.
spending such as supermarket and food shopping
selling agents confirmed that properties that were Longer leasing up periods are applicable for vacant
is likely to remain strong, however discretionary
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due to be auctioned were converted to expression tenancies and there is considerable downward
spending such as on clothing, footwear and
of interest campaigns whilst others were postponed pressure on rents in many areas. Discussions with
household goods is likely to remain at low levels.
indefinitely. We understand that in many cases leasing agents indicate that since March 2020
Source: realcommercial.com.au
where a vendor did not have to sell the property, there has been a significant decline in the level Most retail businesses including pubs, clubs,
it was being held until there was a greater level of of enquiries received for vacant retail tenancies, restaurants and cafes in addition to beauty salons,
market certainty. although the level of enquiry has recently started to hairdressers and other non-essential services
improve. Of the lease deals that have occurred, we within metropolitan Melbourne were allowed
During 2020, properties with strong lease
have noticed a trend towards incorporating longer to reopen as at 28 October 2020 following an
covenants to national operators or those with
rent free periods and shorter initial terms. extended period of forced closure due to the
12Month in Review
Whilst prime retail properties with secure long-term leases and strong lease covenants continue to be April 2021
attractive to investors, there has been a decline in demand for secondary or vacant properties.
impact of the Coronavirus (COVID-19) pandemic turnover due to the COVID-19 pandemic. This is resulted in various store closures, higher vacancy
and the implementation of Stage 4 restrictions. achieved through a combination of rent waivers levels and downward pressure on rents and capital
Distancing requirements continue to apply for staff and deferrals. There is also a prohibition on values in some areas.
and customers and there is a limit on the number landlords charging interest on unpaid rent and a
The ongoing restrictions on office workers, tourist
of people permitted within a retail tenancy at freeze on rent increases during this period. On 23
visitors and international students are resulting
any one time depending on availability of space. April 2020, the COVID-19 Omnibus (Emergency
in significantly reduced numbers of people within
In many instances, restaurant and bar operators Measures) Bill 2020 passed in the Victorian
the Melbourne CBD. One million workers, shoppers
cannot operate at full capacity as a result of the Parliament. One of the objectives of the bill was
and tourists visited Melbourne daily at the start
ongoing government restrictions. This is negatively to provide a legislative framework to facilitate the
of 2020. Recent data (Roy Morgan) indicates
impacting turnover and the ability of tenants to implementation of the good faith leasing principles
visitor levels in mid-March 2021 are 39 per cent
sustain their rent and other costs during this time. provided in the Code of Conduct.
of pre-COVID levels. The level of movement on
On 12 February 2021, the Victorian Premier The Commercial Tenancy Relief Scheme, which working days since 8 March 2021 was the highest
implemented a short, circuit breaker lockdown of initially ran from 29 March 2020 to 29 September in the Melbourne CBD since mid-June 2020 before
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five days commencing 13 February until 17 February 2020, was extended to 31 December 2020 and Melbourne entered its second lockdown.
2021. During this time all retail businesses not has again been extended until 28 March 2021 in
Victorian offices were limited to having 75 per
classified as essential services were closed to line with the Mandatory Code agreed by National
cent of their staff on-premises, but this cap was
customers. Click and collect and take away food Cabinet. The relevant period expired on 28 March
removed at six pm on Friday, 26 March 2021. Public
services were still permitted to operate. 2021 and rent relief is no longer compulsory, so
and private sector offices moved to 100 per cent
some tenants may experience difficulty being able
The Federal government announced in April capacity, but density limits of one person per two
to afford payment of full rent from here on out. In
2020 a Mandatory Industry Code of Conduct for square metres still applied. Many people are likely
cases where rent deferments have been agreed,
Commercial and Retail leases across Australia to to continue working a hybrid of in the office two to
some tenants will also have to pay their existing
be legislated by state and territory governments. three days a week and at home for the remainder.
rent in addition to repayment of deferred rent.
It is applicable where the tenant is an eligible The increase in foot traffic will be a welcome relief
This may place additional financial pressure on
business for the purpose of the government’s for many retail, café and restaurant operators
retail tenants.
JobKeeper program and is for SME tenants with an within the Melbourne CBD.
annual turnover of up to $50 million. The Code of Retail spending growth throughout Victoria was
General leasing conditions in many parts of the
Conduct includes various principles for landlords already subdued prior to the pandemic and this
Melbourne CBD are difficult and there is currently
and tenants which will apply during the Coronavirus has been exacerbated during the various lockdown
a high level of vacancy, however there is still
(COVID-19) pandemic period. periods in 2020. Many of these changes such
reasonable tenant demand within prime locations,
as an increase in online shopping were already
It specifies that landlords must not terminate the particularly from food based and retail service
slowly occurring over an extended period however
lease or draw on a tenant’s security and tenants tenants. Many people are now returning to shopping
changes were accelerated as a result of the
must honour their lease. It also includes a provision centres, restaurants and bars so retail spending
COVID-19 pandemic and government lockdown
requiring commercial landlords to accept rent is increasing from the lows experienced in 2020
measures. The decline in turnover and increasing
reductions in proportion to a tenant’s decline in however it is likely to remain at subdued levels due
pressure on retailers’ occupancy costs have
13to ongoing economic uncertainty, increased savings spotlight for all to see. We expect this to continue Month in Review
levels and restrained wages growth. with rent-free incentives becoming more common April 2021
in our area. Retailers are seeking more sustainable
We consider that due to factors such as subdued
rents based on their current turnover. This can
retail spending, reduced levels of retail tenant
become difficult when trying to negotiate an
demand and pressure on retailer affordability of
outcome that satisfies both tenant and landlord.
occupancy costs, leasing conditions will remain
challenging and there will be continued downward Trent Goodmans
Property Valuer
pressure on rents for retail tenancies in the CBD and
many suburban retail precincts throughout 2021.
Whilst prime retail properties with secure long-term
leases and strong lease covenants continue to be Bendigo Source: realcommercial.com.au
attractive to investors, there has been a decline in
demand for secondary or vacant properties. It is has continued to change the landscape for local
expected that there will be a greater divergence retailers in the area, bringing anchor tenants such
between yields for prime and secondary properties as Big W and Woolworths to the Bendigo CBD,
over the next 12 months. Due to the ongoing effects alongside other high performing national retailers.
of the pandemic and economic uncertainty there is This has had a displacing effect on the CBD and
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evidence of weaker buyer demand, extended selling we are seeing market activity shift closer to this
periods and potentially diminution in asset values activity centre and away from the traditional retail
particularly for secondary properties in areas with activity centres of Pall Mall and Hargreaves Mall.
existing low tenant demand and high vacancy rates. Ultimately it has led to the downfall of some smaller
Nathanial Ramage retailers in the Bendigo CBD. Our assessment is
Property Valuer AAPI that retail activity increased in the early months of
this year and we believe that sub-regional centres
Bendigo will perform well throughout the year. Conversely,
Broadly speaking, the retail sector in Bendigo has small-business retailers could be in for a difficult
been subject to a similar transitioning phase as the year ahead.
capital cities, with a shift towards e-commerce and
According to current market commentary, there
changing consumer habits leading to increased
is a common theme that analysts sense 2021
competition and greater presence of international
to be another unpredictable year for the retail
retailers. Last year the local retail market was
landscape. This is attributed to shifts in consumer
impacted significantly by COVID-19 which was
behaviour and the reduction of government
followed by lockdowns and periods of economic
stimulus packages such as JobKeeper implemented
uncertainty.
last year. Our views are in line with the available
Aside from the economic impacts of COVID-19, the commentaries on the retail sector, as we believe the
retail market in the Greater Bendigo region has broader trends could be difficult to predict with the
already been somewhat volatile for a few years constant changes in consumer behavior.
now. The Bendigo Marketplace established in 1995
The pandemic has thrown retail rents into the
14Queensland
Month in Review
April 2021
Brisbane Sunshine Coast nearing completion off Brisbane Road. As a result,
The retail market in 2021 has rebounded with What is going on in retail on the Sunny Coast? That there may be some light at the end of the tunnel
strength compared to the doom and gloom of is a question we have heard a lot over the past six for Mooloolaba.
exactly 12 months ago. Most retail businesses are to nine months.
Bulcock Street in Caloundra has noted some drop
back to normal and in our local market we are
The answer is different for different locations. in vacancy. This will be interesting to monitor given
not aware of any tenants with a COVID-19 rental
the large influx of population at the Stockland
relief deal. That said, there has been a correction There was limited vacancy in some of the
development, Aura. The nearest beach or water
in rents with a reluctance of landlords to push the established retail strips such as Hastings Street
precinct is a short distance to Bulcock Street
envelope too hard at market reviews, so we have and to a lesser extent the Coolum retail precinct
and this may lead to increased foot traffic and
seen rents either decline or remain stable. pre COVID lockdowns in March 2020. Other areas
therefore some increased demand from tenants.
such as Mooloolaba Esplanade and Bulcock Street
The investment market is very strong with record However, the historical issues with the established
at Caloundra had some issues for some time prior
yields being achieved on the back of record nature of Bulcock Street remain with a number of
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to this, though these areas had begun to see some
low bank interest rates. We are definitely in a older complexes that do not suit typical retailing
improvement also.
market where demand is exceeding supply and uses given their historical uses as large bank
there is resistance from retail property owners Since circa June 2020, we have seen relatively buildings etc.
to sell given the lack of opportunity in other strong weekend tourist numbers on the Sunshine
On the sales front, we are still seeing significant
investment markets. This situation is increasing Coast, which has helped to underpin trade in a
demand for well leased holdings and holdings in
values with prime yields in the 3.5% to 4.5% number of areas. However, weekday trade has still
strong locations with redevelopment potential.
range. That said there is a flight to quality with been slow according to a number of operators
Recent auctions in March include a site rental
prime locations and strong national tenants in and as a result we have seen some impact on
of a large McDonalds holding on the Nicklin Way
hot demand. retail strips. Hastings Street, though still with
indicating a sub-4% yield. Old Soul in Ocean Street,
limited vacancy, had some increased tenancy
There are development opportunities, particularly Maroochydore also sold at auction at a circa 6.4%
turnover during 2020 and into the early months
in the large format retail space. Sites with yield on the passing net income.
of 2021. Coolum Beach also has had some slight
development approval and, more importantly, lease
increase in vacancy, however Mooloolaba vacancy We are likely to continue to see strong demand
pre-commitments in place are feasible, however
increased during 2020. We have noted two recent from investors for a mix of retail assets, so long as
location is the key factor in this exercise.
leasing deals struck along the Esplanade for the lease covenant is appropriate and interest rates
Terry Munn previously long-term vacant café or restaurant remain low. Continued impacts from COVID and
Director
space and there is definitely increased weekend lockdowns etc are likely to impact the traditional
visitation now that the car parking works are retail strips in the short term, though areas with
strong local services will remain strong.
The investment market is very strong with record yields being Chris McKillop
Director
achieved on the back of record low bank interest rates.
15been few local sales since COVID. Investor demand to the same degree as capital cities. This greater Month in Review
Townsville will be increasingly concentrated on properties interest from non-local investors is, in some April 2021
The retail market appears to be at a fork in the
anchored by essential services. instances and for the right properties, forcing
road. The local economy is rebuilding with strong
Kylie Williams tighter yields and higher values, however as
business confidence and continued recovery in the
Property Valuer always investors remain driven by tenant profile
labour market. The buoyant residential market,
and lease terms. For the short term at least
construction sector and overall improvement in
Rockhampton there seems to be a good appetite from investors
liquidity (through stimulus, low interest rates or
Like the great Slim Dusty, this month we are for tenanted properties, however investors
otherwise) are all factors that should flow through
“looking forward and looking back” on the retail have still shown limited appetite for vacant
to the retail sector.
sector. properties, with mainly owner-occupiers acquiring
However we remain cautious that government these properties. Whilst the low interest rate
The retail market in the Rockhampton, Gladstone
stimulus such as JobKeeper contributed to environment exists, we will probably see lower
and Central Highlands region has been gradually
this artificial bubble-like state. Ongoing COVID yields than long term averages however, should
transitioning and pivoting throughout the
restrictions have also reduced foot traffic interest rates start to rise, we should see an
COVID-19 period. Unfortunately, a number of
in larger centres and this continues to place increase in yields as investors seek a risk premium
retailers were severely impacted during this time,
pressure on smaller non-essential retailers. We above the cash rate. The best opportunities within
however others have been beneficiaries of a
may not know the full extent of the impact, if any, the market appear to be for vacant properties
change in consumer spending. Staples including
to our local retail sector until the second half of which, if the property can be tenanted with a
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food outlets, petrol stations, home and garden
2021, once businesses are forced to stand on their good tenant and lease covenant, may be able to
suppliers, leisure and outdoor suppliers and
own two feet. be sold for a profit.
alcohol shops seem to have benefited, with a
In terms of retail rental rates, we believe we are number of existing operators opening additional In summary, the year ahead for the Central
unlikely to see any significant change during 2021 stores, relocating to better locations or new Queensland retail market generally appears
as affordability disparity remains and available businesses entering the local market. Whether positive, however as always this will be based on
retail space remains high relative to current this shift in consumer spending will continue consumer spending and only time will tell if the past
demand. Yields are likely to remain steady within remains to be seen, however in the current 12 months is replicated in the next 12 months.
the six to eight per cent range although there have market it seems to be driving most of the demand Greg Williams
for retail space. Director
Another development throughout the COVID
Wide Bay
period has been decentralisation from capital
The retail market in the Wide Bay is set for an
cities, with residents moving to regional Australia
interesting year. There has been evidence of yields
or seeking to invest in regional Australia for asset
for investment stock sharpening across the board,
diversification, with regional Australia generally
along with green shoots in the three main localities
not being affected by the impacts of COVID-19
of Bundaberg, Hervey Bay and Maryborough.
We expect demand to remain strong for retail investments
throughout the year, with the potential for yields to compress
Townsville Source: realcommercial.com.au further as investors compete for leased properties.
16We expect demand to remain strong for retail tourists and lack of international tourists, many Month in Review
investments throughout the year, with the potential businesses have simply closed. It is difficult to April 2021
for yields to compress further as investors gauge what percentage of businesses currently
compete for leased properties. We have also seen closed will ever reopen.
an increase in coverage of the potential returns
One of the main concerns is that international
generated from investing in commercial properties.
tourism plays a large part in the Cairns economy
This has further increased demand for commercial
and it is unknown how long it will be before
investment stock.
significant numbers of foreign travellers return to
Our tips for anyone seeking to purchase a Australia and Cairns in particular. It is expected
commercial investment property this year are: that the retail sector will continue to struggle in
the short to medium term.
◗ Conduct a proper due diligence of the property; 28 Grandview Drive, Mount Pleasant Source: realcommercial.com.au
Throughout 2020, commercial agents reported
◗ Investigate the lease covenants and tenant
business risk in the initial stages of business that 60 to 70 per cent of retail tenants requested
security;
establishment have become a fairly common and received rental reductions of 50 to 100
◗ Research market rents to determine whether feature in recent years. per cent of normal rent levels, though many
the current rent is sustainable over the long term continued to pay outgoings. The vast majority of
On a side note, we are aware that Westpac Bank
(should a vacancy occur); and these businesses are directly tourism driven along
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has announced the closure of its branch at 28
The Esplanade and around the central business
◗ Consider engaging a professional valuer to assist Grandview Drive, Mount Pleasant in the Greenfields
district.
with all of the above. retail precinct.
Ben Harnell Through the latter stages of 2020 and early 2021,
There are no recent retail property sales to report,
Property Valuer agents reported some activity in the small and
primarily due to lack of quality listings rather than
affordable retail rental market, however most
an absence of demand especially for well anchored
Mackay of these rentals are on short terms with tenants
neighbourhood shopping centres and lessors’
There are still some fairly substantial vacancies in looking for leasing incentives either by way of a
interests in service stations.
the retail areas of North Mackay/Mount Pleasant rent free period or fitout. There is limited market
including tenancies which were formerly occupied Sentinel Group Australia has acquired three GP confidence as a whole and there was reportedly
by Spotlight and Super A-Mart. Super Clinics in the Mackay region. The centres limited leasing enquiry and activity overall
are at Walkerston, Ooralea and Rural View and are for listed stock above say 50 square metres
AMX Superstores has leased a 1472 square metre
subject to long leases of 10 to 14 years. throughout 2020 and the early part of 2021.
retail showroom at 20 Grandview Drive, Mount
Pleasant at an effective rental level consistent with Greg Williams Agents have reported almost no enquiry from
Director
similar tenancies in this locality.The lease rental is tenants looking to establish new businesses with
low in the first year but has substantial annual fixed most enquiries being from established tenants
Cairns
increases throughout the lease term. looking to downsize, get into a higher quality
The Cairns retail sector has been hit hard by
tenancy for a similar rental level or looking to
Part of the old Bunnings Warehouse has been COVID-19. Much of the retail sector caters to the
secure something similar for less.
leased to Eureka Street Furniture. This part of the tourist trade, being cafes, restaurants, duty free,
complex had been unoccupied for several years. tour booking agencies and retail in the central Shane Quinn
Managing Director
Innovative lease structures to help tenants mitigate business district. With the limited flow of national
17Month in Review
Toowoomba
April 2021
Retail leasing in Toowoomba was subdued in 2020,
which was a reflection of both reduced tenant
demand and the effects of COVID-19. With the
rollout of a vaccine now underway, there should be
less apprehension from prospective new tenants
in 2021.
There is currently an oversupply of retail space
available for lease in Toowoomba. The Toowoomba
CBD has been adversely affected by a number
of factors including COVID-19, an increase in
competition due to the expansion of Grand Central
Shopping Centre and the impact of online shopping.
There has also been an increase in vacancies in
both convenience and neighbourhood centres.
There has been strong growth in franchise food
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outlets, which have underpinned new convenience
centres with predominantly food related tenants.
The restaurant sector was hardest hit by COVID-19
and the full return to normal trade welcomed.
Also of note within the retail market at present is
the rebranding and closure of Target and Target
Country stores. Within our area, only one store
is closing at Murgon, whilst stores at Gatton,
Chinchilla, Dalby, Goondiwindi, Warwick, Stanthorpe
and Moree have been rebranded to K Hub Kmarts.
Investor demand has remained strong but the lack
of quality, fully leased properties has limited the
number of investment sales. The decline in tenant
demand has ensured that prudent buyers have
placed more emphasis on quality of tenants and
security of cash flow. This could potentially create
opportunities for buyers to secure secondary
investment properties with poor occupancy at a
reduced price.
Ian Douglas
Director
18South Australia
Month in Review
April 2021
Adelaide the open-air festival in Adelaide’s parklands property sectors. Recent Corelogic Cityscope
The last 18 months have caught retail investors, would have come as another welcome boost for data indicates that sales for retail buildings in the
owner-occupiers and tenants between a rock surrounding local retailers, with over 70,000 of Adelaide CBD are beginning to rise. The latest
and a hard place. The retail sector has had to those Adelaide Festival tickets sold to tourists quarterly data shows $21.6 million worth of retail
deal with city-wide and state-wide lockdowns, as visiting South Australia. building sales for the three months to January
well as significant trading and social distancing 2021, compared to just $3.2 million for the three
The Adelaide Fringe created activity for CBD
restrictions. All players in the retail market will months to October 2020. Retail rents are still yet
and local retailers throughout the festival period
be keen to put the troubles of 2020 behind them to see any major shifts or bounce back, after a year
from 19 February to 21 March. Just 12 months
and approach 2021 with more optimism and we that saw many tenants granted rent free periods
earlier, the end of the Fringe Festival in 2020
will hopefully see trading conditions that are more and rental abatements.
marked the beginning of COVID-19 lockdowns and
beneficial for all retailers.
restrictions, and now in 2021, for many people it The early signs are positive for the retail property
The retail market is set for a bounce-back in has marked the return to a sense of normality for market and we expect these trends to continue as
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2021 as the global vaccine rollout continues; most South Australians. the vaccine rollout reaches more South Australians,
restrictions are continuing to lift at events around however, we may not see a full return to the norm
Current restrictions were eased even further at
the state and retailers are set to benefit from this. until all border restrictions are lifted and the
midnight on 30 March, with hospitality venues such
In recent weeks we have seen crowds return to tourism industry is back in full swing.
as pubs and hotels allowed to increase capacity
sporting events, which provides a massive boost Chris Winter
to 75 per cent. Previous caps on indoor seated
for surrounding retailers, particularly restaurants Commercial Director
venues were lifted entirely, however masks are
and bars in CBD locations. As the Adelaide Crows
mandatory for patrons once the venue reaches
and Port Adelaide embark on their AFL seasons
50 per cent of its seating capacity. Dancefloor
with some much-needed home games at Adelaide
restrictions were removed entirely for venues with
Oval, the CBD retailers that provide places to eat
capacity up to 1000 people, potentially reviving
and drink before and after games will welcome the
the nightlife scene in Adelaide (source: InDaily –
extra traffic.
Adelaide Independent News).
The Adelaide Fringe was another much-needed
While we may be seeing the beginning of a
stimulus for local retailers, with a total attendance
recovery in retail, there are softer yields in the
of 2.7 million people over the 31 days of festival
retail markets in comparison to other commercial
shows. The total of 632,667 tickets sold for
The early signs are positive for the retail property market and we expect these trends to continue as
the vaccine rollout reaches more South Australians, however, we may not see a full return to the norm
until all border restrictions are lifted and the tourism industry is back in full swing.
19Western Australia
Month in Review
April 2021
Perth Yield compression is apparent and likely to remain that possess sound real estate fundamentals to
The retail property market in Perth concluded the for the short term, driven by the low prevailing cost be repositioned by landlords weary of on-going
2020 calendar year on a sombre note. of funds in the current debt finance market. vacancy and substandard rental returns.
Prior to the advent of the COVID-19 pandemic, On a less positive note, the number of discount The Code of Conduct for retail tenancies introduced
the retail property market in Perth was already department stores in sub-regional shopping centres at the onset of the pandemic expired on 28 March
facing challenging conditions. Unfortunately, the confirmed or mooted to be vacating in the near 2021. The financial strength of incumbent tenants
pandemic only made the situation worse. The future is sobering. Backfilling these tenancies may will be monitored closely in the coming months,
impact on the trading ability of businesses across prove challenging. particularly as government stimulus measures
almost all retail property classes was severe and (such as JobKeeper) are also wound back.
Despite their much-publicised trading difficulties
pronounced. Certain retailers, who appear to have indirectly
and visible vacancy, we expect traditional high
benefited from the cash boost, such as motor
The main problem has been a lack of transaction streets to retain their appeal to customers, if
vehicle dealerships and taverns, may experience a
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activity. The notable exception was demand nothing else but for the convenience-based
correction of sorts as revenue gradually aligns to
for investment grade retail property (e.g. shopping.
historical trading levels.
neighbourhood shopping centres). These assets
Our team is often surprised at the seemingly long
remained highly sought after, often meeting key The staged roll-out of vaccines will provide
line of tenants for perennially vacant shops in such
criteria that sophisticated investors continue a welcome boost to the tourism sector with
locations, however their business acumen and
to seek such as long remaining lease terms (i.e. increased inter-state travel and the re-opening of
sustainability of operations is often being called
WALE), non-discretionary tenancy mix backed international flights, albeit to selected destinations.
into question by leasing agents active in this space,
by strong lease covenants and sound locational
who have become increasingly discerning as to the In summary, Herron Todd White sees the existing
attributes with a growing population catchment.
expertise of the operator prior to entering lease malaise in retail property market conditions
We expect this asset class to remain highly sought negotiations. continuing in at least the short term. Opportunity
after in 2021. There however remains limited stock does however exist for investors with an increased
We expect the trend of retail space being taken
available for acquisition. Vendors seem reticent to risk appetite to acquire some of those less sought-
up by non-traditional retailers such as health-care
sell despite the tight yields being achieved given after assets in the market place at yield premiums,
services (e.g. physiotherapists, yoga studios, etc.)
insufficient levels of return available in alternative or assets which would benefit from repositioning,
to continue, whilst conventional retailers are likely
investment vehicles. redevelopment or capital expenditure.
to diversify their product or service offering.
For similar reasons, we expect demand from Greg Lamborn
Land holdings in established high street locations Director
eastern states-based buyers to continue unabated.
remain keenly sought after, despite the level of
Cashed up investors are likely to continue to cast
tenancy risk, which is a function of the scarcity
their net over Western Australia, attracted to the
of sites offered to the market in these locations,
rental returns on offer which tend to be above and
the high underlying land value and prospect for
beyond those available locally.
mixed use redevelopment. We envisage such assets
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