Month in Review May 2022 - 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 May 2022 The Month in Review identifies the latest movements and trends for property markets across Australia.
Contents
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any state or
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A message from our CEO 3
Feature – Construction challenges and the property market 5
Commercial - Retail 6
National Retail Overview 7
New South Wales 8
Victoria12
Queensland14
South Australia 18
Western Australia 19
Northern Territory 20
Residential 21
National Residential Overview 22
New South Wales 25
Victoria39
Queensland44
South Australia 54
Western Australia 57
Northern Territory 61
Australian Capital Territory 63
Tasmania64
Rural 65
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
May 2022
Welcome to the May edition of Month In Review
It’s no surprise given the number and scale of is making the decision to build or renovate harder tenants who can endure over the long term.
challenges we have all faced over the past few and less likely.
As highlighted by retail specialist Vanessa Hoey
years that most Australians have grown proficient
What we see now is a shift among owners who in her national overview this month, workers are
at quickly responding to change. But while we’ve
had been planning a renovation or construction. returning to CBD offices in some form too. This
become fast to adapt, the focus on the near term
Many are weighing up whether buying an improves trading for inner-city retailers who
can take away from thinking about the long, even
established home might be more prudent given can now rent space at a historically reasonable
mid-range impacts and knock-on effects from any
the cost and time blowouts. Our teams have cost which is presenting opportunities for some
disruption.
certainly spotted this trend across the country companies to re-establish marquee storefronts.
Take the recent jump in interest rates, as an as you’ll see in this month’s submissions. We’ve
example. They were prompted by a higher-than- observed that homeowners and investors alike
expected rise in inflation, fuelled by supply chain are being drawn to completed homes rather than
COMMERCIAL
- INDUSTRIAL
shortages, international events, and strong those with renovation potential. Given costs are
CEO
domestic demand. The RBA’s move, likely to predicted to be elevated over the coming one-to-
be the first of many, is significant and there is two years, I’d venture that finished homes will not
no doubt households and property investors only retain their price premium for some time,
will need to rein in spending and reassess their but the value spread between renovated and
budgets in response. unrenovated properties will, in all likelihood, get
wider.
While we expect Australians to respond and
demonstrate great agility, long lead times and Everyday cost increases are having a direct
locked-in commitments will make it difficult and impact on the retail sector as well. The rising cost
could result in an extended period of high inflation of living is a result of skyrocketing manufacturing
coupled with rising interest rates. How this and transport costs. Add in the interest rate
manifests in property markets and different asset increase pressures, and household discretionary
classes will of course vary over time. spending comes into sharp focus.
In the residential space, for example, the This plays into the financial security of retail
construction industry has been hit hard. While business owners which, in turn, impacts
owners have been eager to build with good levels values and yields on certain retail assets.
of household savings and a desire to upgrade
Our teams have looked at new development
their homes, this is clearly becoming more
and refurbishment in retail and discovered
difficult. Securing materials (let alone a builder)
most smart operators are employing
at a reasonable price coupled with lengthy and
strategies to attract and keep retail
uncertain build times and now rising interest rates
3 3
Depending on the retail asset in question, tenants rural markets aren’t likely to fall anytime soon. only identify the immediate impacts of today’s Month in Review
will also be attracted to recently upgraded space. This fine balance will be monitored closely by challenges but the longer-term fallout as well. Put May 2022
While a retail tenant’s ultimate leasing decision operators for a while yet. simply, we’re best placed and most able to keep
will be most influenced by other elements such clients informed of changes in the market and
The flow-through impacts of inflation and supply
as floor space, location and exposure, I recognise how they can best respond.
chain delays are far-reaching, and the way they
that the market is competitive. As such, having an
affect each household isn’t always obvious. In my Gary Brinkworth
upgraded space completed to a high standard as
opinion, if you are trying to sell or lease a quality
part of the lease incentives can only sweeten the CEO
asset – whether it be residential or commercial
deal.
– you should be able to get a premium for a
Looking toward the rural sector and delays in property that’s new or renovated. How long this
the supply of production inputs, along with rising premium can be sustained is hard to judge unless
costs, do present a challenge. That said, strong you hold expertise in the field. That’s where the
commodity prices are offsetting some of the pain. specialists at Herron Todd White come in. Our
Also, general strong property values across most leading property experts are well placed to not
COMMERCIAL
- INDUSTRIAL
CEO
4
Construction challenges and the property market
Month in Review
May 2022
… or an “Appetite for Construction”
We Aussies love our homes in all their shapes and
sizes and while there’s charm in their history, the
But anyone who is looking to undertake some sort of build now will
opportunity to build from new or renovate up to tell you there are headwinds to be navigated.
modern standards is compelling.
dedicated work-from-home space, breakout area the sector is heading as we all try and put the
It’s satisfying to have a hand in your home’s
for kids and outdoor living. pandemic further behind us.
design, fit out and finish. You can mould your
property into the ideal abode for you and Enter the construction industry. The teams For commercial this month its retail and we, once
your family. that make the dream a reality for imaginative again, take on a construction bent.
homeowners across the nation.
The importance of living space adaption was We’re looking at new builds and refurbs in the
COMMERCIAL
- INDUSTRIAL
brought into sharp focus over the past two years. But anyone who is looking to undertake some sort retail sector and what this means for tenants
FEATURE
The way we used our homes changed and we of build now will tell you there are headwinds to and landlords alike. Is there an appetite for
needed them to flex as much as our workplaces be navigated. A confluence of events has seen the construction in a sector that’s faced enormous
and schools to ensure life could proceed as demand for builders and materials far outstrip the headwinds over the past couple of years? The
normally as was possible. In today’s market, for available supply of both. Anyone with an inkling answers lay within.
example, you’d be hard pressed to find a new or of economic nous will tell you, that means higher
Finally, our rural teams again provide a
renovated family property that didn’t include a costs and longer project times.
comprehensive report of all things primary
But as we often say in our Month In Review production. In addition to their market wraps,
pages, not all markets operate at the same pace. they’ve delivered thoughts on supply chain issues.
If you are planning some construction, then How have delays in accessing production inputs
understanding the landscape in your location manifested in the rural property space?
and at your price point is crucial… and this is best
There you have it again folks – an incredible
achieved by seeking advice from local experts.
collation of knowledge from shore to shore.
Here’s where Herron Todd White steps in. Of course, while the information throughout
delivers an excellent foundation for your
This month, our residential teams look at the
property musings, there’s nothing like bespoke
state of construction markets across the nation.
advice addressing your own personal property
They apply their extraordinary skills to give you
concerns. Remember, no matter what type of real
the rundown on what it’s costing to build or
estate your hold, there’s a Herron Todd White
renovate in their specialist areas. Our valuers also
expert ready and able to guide you through the
highlight the suburbs where the most activity is
challenges and deliver an exceptional outcome.
underway. Some even forecast where they think
5
Commercial May 2022
National Retail Overview
Month in Review
May 2022
Retail trade has been resilient in recent months Retail precincts in CBDs now need to be a destination and
as consumers increased their spending activity.
The Australian Bureau of Statistics reported that
retailers need to innovate and provide a reason for customers
Australian retail turnover rose 1.6 per cent in March to visit their stores in person.
2022, reaching a new record level, following a 1.8
per cent rise in February 2022 and 1.6 per cent on retail spending. Consumer confidence has been work from home. In addition, border closures and
increase in January 2022. Easing of restrictions dampened by higher inflation and the expectation travel restrictions have limited tourist visitors
across Australia and strong consumer demand of increasing interest rates. Many households and international students. The lack of visitors
resulted in increasing retail trade in the three however accumulated large savings during the to CBDs has negatively affected the ability of
months of the March quarter. Every state and pandemic period and many mortgage holders are retail businesses, in particular food and beverage
territory saw a rise in retail sales in the month to ahead in their repayments so this could ease some operators, to generate turnover and maintain rental
March 2022 except for South Australia. financial pressure on consumers. payments. This has resulted in higher vacancy
COMMERCIAL
levels and increasing incentives and has placed
However, the recent increase in interest rates and Reduced retail spending in addition to rising costs
- RETAIL
downward pressure on rents throughout many of
forecast further rate rises during the remainder of such as wages and energy put pressure on retailer
the major CBDs in Australia.
2022 are expected to place additional pressure on affordability of rents and other outgoings. In many
household budgets and may have a negative impact areas in Australia, leasing conditions will remain It is evident that throughout Australia, even in
challenging and there will be continued downward states that avoided extended lockdown periods
pressure on rents for retail tenancies throughout and restrictions during the past two years, office
the remainder of 2022. There are some positive occupancy is significantly below pre-COVID-19
signs with increased leasing activity levels evident levels. This has a direct impact on retail trade in
in many retail precincts with landlords and tenants these areas which rely on business from office
now more willing to negotiate to achieve mutually workers. There are some signs that the number
agreeable outcomes. Tenants are now seeking of office workers within CBDs is increasing and
greater flexibility including shorter initial terms, will likely continue to grow over the coming
sometimes as short as one year, with further months. Higher levels of foot traffic have been
option terms allowing also for some certainty recorded in recent months in many major CBDs
to retain the premises should the location prove including Sydney and Brisbane as well as smaller
suitable for the business. capital cities Hobart and Darwin, however
Vanessa Hoey
Commercial
Melbourne is continuing its slow recovery. Moving
During the past 24 months there have been
Director forward many people are likely to continue to
significantly reduced numbers of people within
adopt a hybrid schedule, working in the office two
the major Central Business Districts throughout
to three days a week and at home the remainder
Australia because of various COVID-19 restrictions
of the week.
and state government advice for workers to
7
Many reports suggest that retail precincts in Month in Review
CBDs are not obsolete – they are just not the As prime retail properties with secure long-term leases and strong May 2022
same as they were pre-pandemic and are in the lease covenants continue to be attractive to investors, conversely there
process of evolving and changing their purpose
and function. Retail precincts in CBDs now need
has been a decline in demand for secondary or vacant properties.
to be a destination and retailers need to innovate
or syndicates, seeking security of income and ◗ A $400 million redevelopment and expansion of
and provide a reason for customers to visit their
potential longer-term capital growth. There is the Central Market Arcade in Adelaide which will
stores in person. With the increase in vacancy
currently limited stock of quality assets of this be known as Market Square. Construction on the
and available space in many CBDs some major
nature available for sale. Most private investors project is scheduled to commence in mid-2022.
retailers, particularly those that experienced
hold this asset type on a long-term basis. Upon completion the property will include new
strong online trade during lockdown periods, have
retail space, an A-grade commercial office tower,
sought to use this as an opportunity to secure As prime retail properties with secure long-term
childcare centre, residential apartments and a
new retail space at lower rental rates and open leases and strong lease covenants continue to
hotel.
flagship stores or increase their footprints. Leasing be attractive to investors, conversely there has
agents have noted enquiry from major national and been a decline in demand for secondary or vacant ◗ Quay Quarter Lanes, which recently opened in
international brands seeking opportunities for retail properties. It is expected that there will be a greater Circular Quay in Sydney, comprises a mixed-use
space in the CBDs including in Sydney, Melbourne, divergence between yields for prime and secondary precinct incorporating retail and residential
Adelaide and Brisbane. For example, Italian fashion properties over the next 12 months. Due to the apartments. There are numerous restaurants,
COMMERCIAL
retailer Gucci opened a flagship store at Queens ongoing effects of the pandemic and economic wellbeing and lifestyle retailers with tenants
- RETAIL
Plaza in Brisbane in 2021. uncertainty, there is evidence of weaker buyer such as Bouillon l’Entrecote, Adora Handmade
demand, extended selling periods and potentially Chocolates, Humble Bakery and Besuto. Quay
During 2020, 2021 and 2022 to date, properties
diminution in asset values for secondary properties Quarter Lanes forms part of Quay Quarter
with high quality lease covenants to national
within areas with existing low tenant demand and Sydney, an 11,000 square metre mixed use
operators, or those with tenants who operate
high vacancy rates. development developed by AMP Capital.
essential services and demonstrated strong
turnover volumes (during the pandemic period) There is limited new construction of major ◗ Ferny Grove Central is a proposed new
continue to remain attractive to investors. Retail shopping centres planned throughout Australia in convenience-based retail shopping centre
assets such as neighbourhood centres, large format 2022, however many retail landlords are seeking to located approximately 20 kilometres north
retail, supermarkets, liquor stores, pharmacies and redevelop or expand their properties to include the of the Brisbane CBD. It forms part of larger
fast-food restaurants with long term leases are addition of other uses such as medical, childcare, development scheduled to be completed by late
receiving strong interest from purchasers when office and residential. Some landlords with available 2023 which will also include apartments and a
available for sale given the security of income funds took advantage of the lockdowns throughout commuter car parking facility adjacent to the
generated. 2020 and 2021 to undertake refurbishments or Ferny Grove train station and bus interchange.
repurposing for alternative uses and are now The shopping centre component will include a
There are currently very strong levels of purchaser
benefitting from being able to attract quality Woolworths supermarket, Dan Murphy’s liquor
demand for prime retail assets including properties
tenants relatively quickly. store, food and beverage operators, retail
with long-term leases to major tenants such as
services, childcare centre, gym and medical and
Woolworths Group Limited and Coles Supermarkets Some of the refurbishments, new development,
allied health services.
Australia Pty Ltd. Demand exists for assets within redevelopments and expansions which have
this market in the range of up to $40 million from occurred or are planned in Australia include:
private investors who are high net worth individuals
8
National Property Clock: Retail
Month in Review
May 2022
Entries coloured purple indicate positional change from last month.
Balina/Byron Bay Ipswich
Brisbane Newcastle
Central Coast South East NSW
Gold Coast Townsville
PEAK OF
MARKET
Geelong
Sunshine Coast Approaching Starting to Gippsland
Peak of Market Decline Mid North Coast
COMMERCIAL
- RETAIL
Cairns Geraldton
Ballarat Lismore
Canberra Melbourne
Bendigo Mackay RISING DECLINING Darwin Sydney
Burnie-Devonport Rockhampton MARKET MARKET Echuca Toowoomba
Launceston
Esperance
Adelaide Coffs Harbour Start of Approaching Hobart
Adelaide Hills Gladstone Recovery Bottom of Market Illawarra
Barossa Valley Mildura South West WA
BOTTOM OF
MARKET
Alice Springs Hervey Bay
Bundaberg Perth
Emerald
Liability limited by a scheme approved under Professional Standards Legislation.
This report is not intended to be comprehensive or render advice and neither
Herron Todd White nor any persons involved in the preparation of this report
accept any form of liability for its contents.
9
New South Wales - Retail 2022
Month in Review
May 2022
Sydney
The forced closure of many retail businesses
due to COVID-19 lockdowns has certainly had a
broadly negative impact on the retail market.
Some businesses have thrived during and post
lockdown but overall, a lack of retail spending
and closed international borders has had far
reaching implications for businesses and thus
the retail market.
We have seen increases in vacancy in most areas
and extended selling periods of assets with weak
leasing profiles. Retail assets with high vacancy
COMMERCIAL
- INDUSTRIAL
rates and those in areas where supply has
- RETAIL
increased have struggled over the past 12 months.
That said, assets in prime locations with strong,
well-established tenants have been very popular
with investors wishing to make the most of the low
interest rate environment. A prime example was seen
at Circular Quay in the first week of April this year,
with a 75 square metre retail shop leased to Guylian Guylian café, Circular Quay Source: realcommercial.com.au
Belgian Chocolate Cafe selling for $11.5 million,
reflecting $153,333 per square metre and a yield of A 75 square metre retail shop leased to Guylian Belgian Chocolate
4.78%, setting a new Australian retail benchmark.
Cafe selling for $11.5 million, reflecting $153,333 per square metre
Similarly, assets providing future redevelopment
opportunities remain generally well sought after.
and a yield of 4.78%, setting a new Australian retail benchmark.
The lockdowns of 2020 and 2021 provided a unique Within the CBD, retail is generally still subdued as well received by the market as it reinvigorates
opportunity for savvy investors and tenants to the market continues to wait for office workers, somewhat tired precincts. New tenants include high
refurbish and renew their premises. We have noted tourists and visitors to return. We have seen some end fashion retailers eager to mark their territory
numerous buildings and tenancies that have made new development in the CBD including at Martin in a prime city position and new food operators,
use of this time to undertake upgrades, setting Place and surrounding Wynyard. Despite the particularly around Wynyard station.
themselves in good stead for the end of lockdowns generally flat nature of the market, it has been
New retail construction has been fairly limited
and a return to normality. reported that this new retail development has been
in Sydney in recent times. The built-up nature
10of the inner-city areas mean that there are few from which to draw. This is a positive outcome for Month in Review
opportunities to expand or develop. New retail retailers who have been facing steady headwinds May 2022
construction has been typically limited to new while dealing with COVID-19 related trading
housing estates in the outer western suburbs challenges. While the addition of residential housing
which promise residents new shopping centres is welcome, each of these new projects comes with
and retail hubs to service these newly developed a retail and commercial component, adding stock
estates. The take up of these centres is reported to a well-supplied sector. One would encourage
to be strong with smaller tenancies dominated by Council to review planning regulations to ascertain
local businesses. whether the addition of new retail stock is really
required; a live-work concept surely would be more
The subdued nature of the market means that any
in tune with market demands. As far as major
new development of retail property at this point
projects go, all eyes are on WIN Corp’s Crown Street
in time is really a long-term play, with a return on
site which is in concept stage. The final design aims
investment likely to take some time to come to
to reinvigorate the western section of Crown Street,
fruition.
however, this is still a long term proposition.
Fit outs and refurbishments have increased in cost
Local leasing agents are reporting improved
with the overall supply of building materials being
interest from tenants looking to lease space with
patchy at best and a marked increase in cost of
COMMERCIAL
good take up evident along Crown Street Mall
supplies being widely reported. In addition, wait
- RETAIL
over the past 12 months. Most interest apparently
times for trades can be long and hard to plan for,
is coming from food and beverage and service
which has deterred some from going down this
commercial tenants looking to take advantage
path altogether.
of competitive rental rates. Investor demand is
There are uncertain times ahead for retail as we surprisingly high, as evidenced by the $4.6 million
adjust to the new normal and recover from the far sale of 37-39 Princes Highway, Dapto through
reaching implications of the pandemic. Colliers International. Mixed-use assets, particularly
Angeline Mann those with a residential component, remain popular
Commercial Director while owner-occupiers are scouring the market in
the sub $1 million range. A possible interest rate
Wollongong rise is expected to cool this activity.
Probably the biggest impact on the retail market in
Scott Russell
Wollongong at the moment is the number of new Director
large scale residential unit projects completed over
recent times with many more advancing, providing
CBD retailers with a growing population base
Most interest apparently is coming from food and beverage
and service commercial tenants looking to take advantage
of competitive rental rates.
11Victoria - Retail 2022
Month in Review
May 2022
Melbourne It is expected that the number of office workers within the
Victorians continue to adjust to amendments
to COVID-19 regulations. A further easing of
Melbourne CBD will continue to increase over the coming months.
restrictions was introduced from 23 April 2022
From 15 December 2021, fully vaccinated travel-related services is likely to divert spending
which removed the isolation requirements
international students were able to travel to and away from retail. Reduced spending in addition to
for close contacts, vaccine requirements and
from Australia without needing to apply for a travel rising costs puts pressure on retailer affordability of
mandatory mask wearing for retail workers.
exemption. It is expected that the number of office occupancy costs. We consider that because of this,
Whilst the easing of restrictions has been
workers within the Melbourne CBD will continue to leasing conditions will remain challenging and there
generally well received, the longer-term impacts
increase over the coming months. Moving forward will be continued downward pressure on rents for
of extended lockdowns and reduced foot traffic
many people are likely to continue to adopt a hybrid retail tenancies throughout the remainder of 2022.
in the Melbourne CBD are still having a negative
schedule working in the office two to three days a
impact on many retail tenants, in particular food Rental levels within the wider Melbourne suburban
week and at home the remainder of the week.
COMMERCIAL
and beverage operators. market are generally expected to remain stagnant
- RETAIL
The end of the Commercial Tenancy Relief Scheme throughout 2022 due to factors such as the
During the past 24 months there have been
on 15 March 2022 means that tenants who were ongoing impacts of the Omicron variant and
significantly reduced numbers of people within the
previously eligible for rent relief under the scheme rental affordability issues. The downward pressure
Melbourne CBD due to the response to COVID-19
do not benefit from the same levels of protection. on rents in suburban retail strips experienced
and advice from the Victorian government for
Generally, leasing demand for vacant or secondary throughout much of 2021 is expected to continue
workers to work from home if possible and
properties is expected to remain at similar levels throughout 2022. Tenants are continuing to
restrictions on tourist visitors and international
to those experienced throughout 2021 as tenants seek shorter initial terms, sometimes as short as
students. As a result, the ability of retail businesses
remain hesitant to enter into new lease agreements one year, with further option terms allowing for
within the Melbourne CBD to generate turnover
in less popular precincts. We have continued to flexibility in the short term and some certainty
and maintain rental payments has been negatively
see increased levels of owner-occupiers seeking to to retain the premises should the location prove
affected. This has resulted in higher vacancy levels
purchase premises instead of leasing in this current suitable for the business. From a landlord’s
and increasing incentives and placed downward
low interest rate environment. perspective, these flexible leasing terms are
pressure on rents.
attracting tenants, covering operating costs and
At its May 2022 meeting, the Reserve Bank of
From 18 February 2022, the Victorian government providing for reviews to market should the leasing
Australia decided to increase the cash rate by 25
removed density limits in hospitality venues as market improve.
basis points to 35 basis points, marking the first
well as the need for customers to check-in at
increase since November 2010. It appears likely that During the remainder of 2022, the Melbourne
supermarkets and retail venues and permitted
further rate rises will occur during the remainder retail investment market is expected to see a
dance floors. From 26 February 2022, the public
of 2022. The increased cost of borrowing will place continuation of the varied results experienced
health recommendation for Victorians to work or
pressure on household budgets and may have a over the past couple of years across different
study from home was removed, while masks are no
negative impact on retail spending. With travel market segments. We are of the opinion that
longer needed in most indoor settings.
restrictions now easing, spending on tourism and yields will remain stable for retail properties in
12◗ A planning permit has recently been approved Month in Review
We are seeing these works being undertaken both exclusively by the City of Stonnington for the $1.5 billion May 2022
by landlords and in conjunction with incoming tenants who are redevelopment of the Jam Factory on Chapel
Street, South Yarra into a five-tower complex
completing significant works and sharing the costs with landlords. which will include retail, commercial, residential
and a hotel. The development will provide more
strong retail locations with essential retail and lease agreements with the commitment to
than 18,500 square metres of retail space and
service tenants. Some retail property types such undertake extensive capital works to suit tenant
is forecast to revitalise the Chapel Street, South
as supermarkets and national fast food outlets requirements. We understand that timing for
Yarra retail precinct which has suffered high
have shown significant resilience since the onset completion of refurbishments has been challenging
levels of vacancy and significant declines in rents
of the COVID-19 pandemic and continued to given the increased demand for materials and
in the past five years.
strengthen throughout 2021 and year to date labour across the construction sector.
2022 with yield compression evident due to an Nathanial Ramage
Some of the refurbishments, redevelopments and Valuer
abundance of capital seeking investment. It is
expansions which have occurred or are planned in
expected that yields may soften further for retail
Melbourne include:
properties in secondary locations, particularly
within areas with low tenant demand and high ◗ Melbourne Central, a major shopping centre in
vacancy rates. the Melbourne CBD continues to expand with 20
COMMERCIAL
new stores including six major refurbishments
Significant refurbishment projects of retail
- RETAIL
being delivered in 2022. The largest Lego store
properties within the wider Melbourne market
in the southern hemisphere is opening in May
are generally undertaken by landlords to attract
at Melbourne Central. Other new stores include
quality tenants. We are seeing these works being
Cinnabon, Guess, Foodao and Puzzle Coffee.
undertaken both exclusively by landlords and
in conjunction with incoming tenants who are ◗ A $270 million redevelopment of the 140 year-
completing significant works and sharing the costs old Queen Victoria Market precinct is proposed
with landlords. to provide a major retail and community hub
within the expanding northern end of the
Refurbishments of older style premises are
Melbourne CBD. The Queen Victoria Market was
generally required to attract tenants. Given the
severely impacted by the COVID-19 pandemic
costs associated with undertaking these works, we
and restrictions with visitor numbers dropping
consider the investment to be relatively long term
by approximately 40 per cent during 2020
with landlords expecting to recoup the costs over
to 4.8 million visitors. It is estimated that the
the term of the lease. We have seen some landlords
revitalised Queen Victoria Market precinct will
who took advantage of the lockdowns throughout
attract approximately 18 million visitors a year
2020 and 2021 now benefitting from being able
by 2051. The redevelopment, which will include
to attract quality tenants relatively quickly with
the refurbishment of the market’s historic
reduced downtimes.
sheds, new facilities for traders, a food court, a
We have seen evidence that some investors library, childcare facilities, a gallery, community
have purchased older style retail assets in prime centre, apartments and a hotel, is forecast to be
positions during the past two years, then secured completed by 2026.
13Queensland - Retail 2022
Month in Review
May 2022
Brisbane Large format retail and shopping centres are experiencing
New builds in our market are definitely showing signs more refurbishment activity compared to their smaller
of slowing down with developers concerned about
the increase in construction costs which flows on regional counterparts.
to the feasibility of a project, given that yields are
Unit 1 & 2, The Capalaba, 127 Redland Bay Road,
showing signs of stabilising (i.e. are at peak of the Gold Coast
Capalaba sold in January 2022 for $3.2 million at a
market or not far off) and with real growth in rents, After 12 months of abeyance due to the COVID-19
yield of 4.87%.
that feasibility is being squeezed. Therefore the pandemic, the retail market on the Gold Coast
supply of new product to the market has slowed. That has dusted itself off and is preparing itself for a
said, demand is still strong and supply is limited. prosperous future.
Large format retail and shopping centres are As with the whole south-east corner, the most
experiencing more refurbishment activity prevalent form of new retail development has been
COMMERCIAL
compared to their smaller regional counterparts. for infill sites and emerging areas, targeting the
- RETAIL
Existing retail facilities are being refurbished in essential needs of the growing local population.
order to attract potential tenants to leasing their Whilst the delivery of fuel assets has slowed down,
premises and also to attract more customers. the medical and fast-food sectors seemingly still
Generally speaking, newly refurbished retail Unit 1 & 2, The Capalaba, 127 Redland Bay Road, Capalaba Source: HTW
have a good head of steam.
properties are more attractive to investors.
In terms of the coastal strip, the most notable
Whilst refurbished retail buildings are attracting 345 Pine Mountain Rd, Mount Gravatt East sold in recent development in the southern Gold Coast
new tenants, the effective rents have remained November 2021 for $8.6 million at a yield of 5.93%. area has been the refurbishment of the old Kirra
static, because as gross face rents may increase, Beach Pavilion building, which also includes the
this is offset by an increase in incentives.Therefore, Kirra Surf Club. This has resulted in the previous
the high construction costs currently being tenant, Pizza Hut, vacating with the reasonably
experienced are negatively impacting the feasibility large eastern tenancy having since been fully
of projects and putting pressure on developers’ refurbished internally with a new restaurant,
margins.For example we have seen building Siblings, being established by experienced
contracts that are only valid for 30 or 45 days and operators. The instalment capitalises on the
finance can take up to 60 days.The financier needs growing population of Kirra and popularity as a
a signed building contract and builders won’t sign focal point for day trip and holiday tourism as well
a contract subject to finance, thus creating a real 345 Pine Mountain Rd, Mount Gravatt East Source: HTW
as the significant $380 million redevelopment of
conundrum. the old Kirra Beach Hotel site opposite.
As mentioned, demand for stock remains strong as Edward Cox The traditional tourist Mecca of Surfers Paradise
illustrated by the following sales: Associate Director is also in the process of receiving a well-deserved
14retail tenancies are pre-leased, with only one first Month in Review
Townsville
floor restaurant tenancy and the rooftop terrace still May 2022
Townsville has more than 35 convenience centres
available. Completion is expected by the end of 2022.
in addition to 18 neighbourhood shopping centres
The central Gold Coast areas have seen a new and three regional centres, along with a number
style of retail development introduced to the of large format retail and bulky goods nodes. A
market. The Southport Lifestyle Hub on Nesbit majority of modern development over the past
Street was constructed in 2021 and another similar 10 years has been in the outer suburbs and new
development (the Labrador Lifestyle Hub) on Turpin estates where developers are meeting the needs of
Road is nearing project completion. The complexes suburban consumers.
have been developed with small local business
There has been a lull in retail development in past
operators in mind, with the dominant tenant profile
Paradise Centre Source: shoppingcentrenews.com.au years although there is no doubt critical mass
being hair and beauty users, along with some
will trigger expansion in suburban centres such
health and professional services users. Overall,
facelift (well, two actually). The Challenger-owned as Fairfield Waters, Northshore and eventually a
early take up has been strong, with the established
Paradise Centre dominates the southern face of new centre at Elliot Springs, however as urban
Southport complex reflecting occupancy of 95 per
Cavill Avenue and Cavill Mall, occupying the entire sprawl continues in lock step with outward organic
cent and the Labrador development being nearly
block from Surfers Paradise Boulevard to the population growth, the CBD retail environment
85 per cent pre committed. Benchmark rental rates
Esplanade and beach, and after more than five years continues to corrode.
COMMERCIAL
well in excess of $1,000 per square metre have
in the planning and negotiation stage, redevelopment
- RETAIL
been achieved in both locations. It has been 10 years since the former CBD task
of the eastern beachfront precinct is underway. On
force was in place, knighted with the mission of
completion, the $30 million development program At the larger end of the spectrum are two newer
igniting the Townsville CBD. In recent months a
will deliver a new public plaza, a beachfront dining large format retail centres at Robina and Burleigh
national property advocate group held discussions
precinct and upgraded eastern retail arcade. Waters, both branded Home + Life. The Robina
with Townsville business leaders in an attempt to
location was completed in 2017 and later sold in
Also underway at the corner of Cavill Avenue and reactivate the CBD. The same discussion points are
April 2021 for $66 million, reflecting a fully leased
Orchid Avenue is a new two storey retail building as relevant today as they were 10 years ago!A few
yield of approximately 5.50%. The more recent
with a rooftop terrace. All four of the ground floor common threads continue to be discussed: identity,
development at Burleigh Waters was completed
a key retail anchor, car parking issues, on-line
in 2021 and recently taken to the market via an
shopping, accessibility and more beds and desks.
expressions of interest (EOI) campaign. The result
This does pose the question of new commercial
of the EOI campaign is not yet public knowledge,
builds or repurposing the dated partially vacant
however will provide a good litmus test of market
buildings that line the main street.
conditions over the past 12 months.
Ryan Kohler There are only a handful of sites that could
Director accommodate a major retail development (with
There are only a handful of sites that could accommodate a major
retail development (with ample on-site parking) and finding a major
xgxgxg Source: xgxgxgx
commercial retail tenant is as problematic today as it was 10 years ago.
15ample on-site parking) and finding a major be before significant numbers of foreign travellers Additionally, we are aware of two other older style Month in Review
commercial retail tenant is as problematic today return to Australia and Cairns in particular. It is freehold motels which are currently under contract May 2022
as it was 10 years ago. Smaller scale repurposing expected that the CBD retail sector will continue to of sale at prices over $2 million.
of mixed-use development is a real cost effective struggle in the short term, although international
Motel occupancy rates and profitability are now at
option for the inner city area with aid from council borders reopening should provide a much needed
their highest levels since about 2013 and owners
under possible relaxation of development hurdles increase to tourism.
who delayed selling through the weaker stage
and associated costs within the CBD, extending
Suburban retail outlets however have had limited of the market cycle are now taking advantage of
outside the periphery. Smaller scale retail
fallout from COVID-19 and generally show strong improved market conditions.
operators are attracted to the lower rents offered
occupancies. Sales of retail properties have been Greg Williams
outside the major centres, although the lack of car
limited, though this is due to a lack of stock, not Director
parking and limited custom is a major barrier for
buyers.
the CBD. In my opinion, the suburban and regional
centres will continue to flourish whilst the CBD Shane Quinn Toowoomba
Director There has been limited retail development in
retail sector will continue to tread water, perhaps
Toowoomba over the past couple of years.
for another 10 years.
Mackay Developments of note include:
What is an emerging problem in any case is the There have been no new retail developments in
◗ A number of new service stations have been
escalating costs of building materials and supply Mackay.
constructed in the suburbs of Harlaxton,
COMMERCIAL
side constraints plaguing the local property
The motel market has been particularly active Harristown, Drayton and Rockville;
- RETAIL
industry. This issue will only get worse for regional
since late 2021. Recent freehold going concern
cities, especially on the back of the recent flood ◗ A retail showroom complex has been constructed
transactions include:
events of south-east Queensland and northern at 232-236 Anzac Avenue, Harristown. The
New South Wales, with ongoing chatter about the ◗ Marco Polo Motel sold in September 2021 at $2.2 complex has a floor area of approximately 1900
overarching global uncertainties. million or $57,895 per room; square metres in two detached buildings. The
main tenancy has been leased to 4WD Supa
Jason Searston ◗ Tropic Coast Motel sold in December 2021 at $2.3
Director Centre/Kings Camping.
million or $65,714 per room; and
◗ Bel Air Motel sold in November 2021 at an
Cairns undisclosed price.
The Cairns CBD retail sector has been hit hard by
COVID-19. Much of the retail sector caters to the
tourist trade (cafes, restaurants, duty free stores,
tour booking agencies and retail in the central
business district). Without the flow of tourists, many
businesses have simply closed and it is difficult to
gauge what percentage of businesses now closed
will reopen now that tourists are free to travel again.
One of the main concerns is that international
(and domestic) tourism plays a large part in the
Cairns economy and it is unknown how long it will
Bel Air Motel Source: booking.com 4WD Supacentre Toowoomba Source: Facebook
16Potential retail development activity in Toowoomba Month in Review
in 2022 includes: May 2022
◗ A partial redevelopment of the Wilsonton
Shopping Centre has been approved by Council.
The proposed redevelopment includes the
demolition of older sections of the centre with
the construction of a 7-Eleven service station,
food restaurants (reportedly to include Starbucks
and Guzman Y Gomez), car wash and a showroom
tenancy. Construction works commenced in
March 2022.
◗ A food-based retail centre has been approved on
a site on the corner of Anzac Avenue and Devine
Street in the suburb of Harristown. The centre
is to be anchored by a stand-alone tenancy
with drive-through facility with a retail strip of a
number of smaller tenancies. Oporto has been
COMMERCIAL
linked to the development.
- RETAIL
◗ A development application has been lodged to
construct a retail showroom complex on the
corner of James and Neil Streets. The complex
is to be split into three tenancies with a total
lettable area of approximately 3,450 square
metres.
◗ A new McDonald’s restaurant is to be constructed
in North Toowoomba on the corner of Ruthven
and Jones Streets. The site adjoins North Point
Shopping Centre.
◗ A development application has been lodged
to construct a new Hungry Jack’s restaurant
on a site on Anzac Avenue in the suburb of
Harristown. The site adjoins a Puma service
station.
Ian Campbell
Senior Property Valuer
17South Australia - Retail 2022
Month in Review
May 2022
Adelaide The return on investment for these refurbishments and
The South Australian retail property market redevelopments is still enticing, with South Australia continuing
is seeing significant retail construction and
refurbishment in Adelaide. After conflict in to offer higher yields than the eastern seaboard.
Ukraine and surging oil prices paused some
activity, investors and consumers have renewed signed up for retail space, with Dumpling House which will be situated above the 8000 square
confidence in the retail sector. South Australian coming on board for the food court. This project metre, two-level retail space.
suburban retail has remained flat, with reflects a broader trend of prime Adelaide retail
refurbishments and developments remaining space attracting major national and international
at previous levels. The majority of activity has brands that are yet to have a presence in South
been within Adelaide at higher price points and Australia. International fashion retailer UNIQLO is
quality levels as landlords look to attract premium slated to open its first South Australian store within
COMMERCIAL
tenants on secure covenants. the Myer Centre in late 2022 in a new tenancy
- RETAIL
spanning some 1,000 square metres.
Retail yields are continuing to compress with
prominent CBD shopping centre City Cross The return on investment for these
reportedly being sold for $60 million, representing refurbishments and redevelopments is still
a passing yield of 6.25%. North Adelaide Village enticing, with South Australia continuing to offer
located three kilometres from the Adelaide higher yields than the eastern seaboard. For long
CBD was also reportedly sold for $50 million, term returns, URBIS data shows that bricks and
representing a passing yield of 6.75%. Investor mortar retail spending in Australia is expected to
The proposed interior refurbishment for City Cross Shopping Centre
demand remains high for these prime retail assets. increase by $40 billion by 2025 despite increased Source: revelop.com.au
competition from online shopping.
Suburban retail rents remain stable. Incentives
in the Adelaide CBD have reduced slightly as A prominent and long-awaited development Overall, the majority of refurbishment and
workers return from reduced restrictions, is the $400 million Adelaide Market Arcade development is concentrated in Adelaide and is
however certain retail uses such as cafes may still which is slated to begin in June 2022 with an focused on higher price points and quality levels.
see stronger incentives. approximate three and a half year build time. It Suburban retail remains stable, however interest
is reported that the builder, Multiplex, is hoping from interstate and overseas remains strong due
For refurbishments, the new owner of the City
to achieve Adelaide’s greenest office tower, with to the higher yields offered in comparison to the
Cross Shopping Centre, Revelop, has released plans
a six-star green star rating being desired for the eastern seaboard.
to fully refurbish the retail tenancies, food court
approximately 15,000 square metre, seven-storey
and amenities along with the exterior of the centre, Chris Winter
space. Included within the mixed-use development Commercial director
totalling $25 million. Significant fashion retailers
is a 37-storey tower featuring 212 apartments and
VANS and Sheike, who will be opening their first
a 251-room hotel connected by a rooftop terrace,
brick and mortar stores in the state, have already
18Western Australia - Retail 2022
Month in Review
May 2022
Perth Nonetheless construction of new retail space has been
The Western Australian retail sector has
been acutely impacted by trading restrictions
prevalent in designated activity centres in Perth’s establishing,
imposed by the onset of the pandemic, however peripheral suburbs.
over the past 18 months, with the aid of tight
border restrictions, the cash surplus created by chain with accompanying fast food outlets and brand outlets, leading restaurants and bars, myriad
government stimulus measures coinciding with service stations. entertainment options such as Hoyts cinemas,
the state’s mining boom has been largely retained mini-golf and bowling, and health care consultants,
Such assets, if appropriately leased, are
in Western Australia and has found its way to all under the one roof. One could argue that
demonstrating significant returns on investment
consumers’ pockets, the beneficiaries being local- the centre has become a community centre as
when put to market. Led by an influx of eastern
based retailers. opposed to a traditional shopping centre. The next
states-based buyers, demand for modern, leased
stage of the project will see the construction of
Certain retailers found themselves achieving record investment property on the back of the prevailing
COMMERCIAL
350 residential apartments.
sales and revenue in 2021 and into 2022. No doubt low interest rate environment has led to significant
- RETAIL
there is some trepidation amongst such retailers yield compression and premium sale prices that are On a smaller scale, traditional high streets are
following the removal of border restrictions about well over and above replacement cost. retaining their appeal to customers for their
whether turnover will gradually align to historical convenience-based shopping, despite their much-
Investment-grade retail property (e.g.
trading levels, but as these and other trading publicised trading difficulties. Rather than being
neighbourhood shopping centres) is one such
restrictions are gradually eased, households are repositioned by landlords however, refurbishment
highly sought after asset, often meeting key
well-placed to bolster sales backed by a resilient tends to be more frequent and often in the form
criteria that sophisticated investors continue to
state economy and strong growth in the residential of landlord works included as an incentive in new
seek, such as long remaining lease terms (i.e.
property market. lease agreements. Non-traditional retailers such
WALE), non-discretionary tenancy mix backed by
as health-care services (e.g., physiotherapists,
The performance of the residential property strong lease covenants to anchor supermarket
yoga studios, etc.) are becoming more common
market has placed considerable pressure on the operators and sound locational attributes with
as conventional retailers diversify their product or
local construction industry. Labour shortages and a growing population catchment. Prospective
service offering.
construction material supply chain disruptions have buyers remain focused on the length of agreed
contributed to a pronounced and rapid escalation in lease terms, prospects for rental growth and Above all, the retail sector is one that is constantly
build costs across all real estate sectors, while also depreciation benefits. changing. Innovation and re-invention are critical in
delaying project timelines. meeting the evolving needs of customers and are
In terms of major refurbishment, the talk of the
key to the Western Australian retail sector going
Nonetheless construction of new retail space has town is the launch of AMP Capital’s Karrinyup
forward.
been prevalent in designated activity centres in Shopping Centre following an estimated $800
Perth’s establishing, peripheral suburbs. Typically, million expansion and refurbishment project. Greg Lamborn
Director
these projects consist of neighbourhood-sized This project focused on delivering a new retail
shopping centres anchored by a major supermarket experience for shoppers featuring high end retail
19Northern Territory - Retail 2022
Month in Review
May 2022
Darwin 12 months unless a major infrastructure project
The major talking point in the Darwin retail stimulates demand. The recent federal budget
property sector has been the recent sale of was a positive in this regard, promising $2.6 billion
Casuarina Square by GPT Property to the in infrastructure development in the Northern
Sentinel Group for about $400 million. Since Territory including a new port on Darwin Harbour
1973, Casuarina Square has been the King Kong ($1.5 billion), new logistics hubs in Alice Springs,
of Darwin retail, with 190 stores (Big W, K-Mart, Tennant Creek and Katherine ($440 million), a
two supermarkets and specialties) and further hydrogen industry in Darwin ($300 million) and
development potential, however the property is sealing of more of the Tanami Road ($110 million).
not without challenges to maintain its dominance. Terry Roth
It is located in the northern suburbs whilst most Director
of Darwin’s new housing is developing in the
COMMERCIAL
south-east corridor. The ever-present crime
- RETAIL
issues together with changes in consumer retail
habits mean that the new owners will need to be
proactive, especially since the development of new
competing centres at Gateway and Coolalinga.
There are few other transactions to report. Retail
property follows the same general trends in Darwin
as all other forms of commercial property, with
even strongly let property attracting a significant
yield premium over similar assets in other capital
cities. Sales of CBD property tend to be more
focused on potential for upper level development
for office and residential, with CBD retail conditions
remaining very difficult. Overall retail property
conditions in Darwin are expected to remain
fairly static across Greater Darwin over the next
Overall retail property conditions in Darwin are expected to
remain fairly static across Greater Darwin over the next 12 months
unless a major infrastructure project stimulates demand.
20Residential May 2022
National Residential Overview
Month in Review
May 2022
What a difference a month makes! Since our April As owner-occupier demand decreases, investors with new savings
update we now have a Federal election campaign
in full swing and the first RBA cash rate increase in and equity may see opportunities to acquire properties and take
more than a decade. advantage of low vacancy rates and rental price growth.
While Federal elections have traditionally reduced
take advantage of low vacancy rates and rental Simply increasing contract prices may not be as
activity as people wait for the outcome, multiple
price growth. effective when it comes to interest rate rises. It will
interest rate increases are looming and appear to
be interesting to watch this space evolve and see if
be impacting buyer sentiment. This has been most In addition, Australia’s low unemployment will
builders can find solutions.
notable in Sydney and Melbourne where growth attract immigrants as international borders reopen
has continued to ease and may have peaked in a and international travel normalises. Many of these In addition, rising interest rates could do little to
number of markets. new Aussies may look to purchase a home rather stymy first homeowners from building. There are
than compete in the tight rental market. several existing grants helping this cohort into new
RESIDENTIAL
The RBA’s April Financial Stability Review noted
builds, and the tightening rental market makes
the existence of strong household balance sheets Rate changes and construction
ownership rather than renting a compelling option.
across the nation underpinned by high savings, Cash rate increases can be a blunt instrument to
a robust labour market and rising house prices. curb inflationary pressures which can also have Ben Esau
National Director, Residential
Owner-occupiers with a variable loan had a undesirable flow on effects for some sectors.
median excess payment buffer sitting around
In the construction industry, rising interest rates
21 months which is approximately double the
will compound existing challenges in particular for
levels from the start of the pandemic. The result
inflight projects. Demand for new dwellings and
is that many homeowners should be in a stronger
renovations spiked through the pandemic which,
position to weather increasing rates than
in turn, put pressure on the cost of building. But
previous cycles.
increases in construction costs have been driven
Of course, the extent of future rate increases, the primarily by the lack of supply surrounding core
speed at which they’ll be passed on by the banks materials and labour – it’s unlikely rate rises will
or the degree to which property values might fall is remedy this.
difficult to predict with certainty. That said, buyers
There were several high-profile builders who
more generally may be less enthusiastic but there
collapsed last year in part due to quickly rising
are some individual buyer demographics who may
costs impacting margins. Continued interest rate
soften the landing.
increases will only compound this problem for the
One group is investors. As owner-occupier demand builders already under margin pressure.
decreases, investors with new savings and equity
When costs rose during the pandemic, builders had
may see opportunities to acquire properties and
to increase their quotes to protect their margins.
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