APPD Market Report Article
SydneySeptember 4, 2023
Andrew Quillfeldt, Head of Capital Markets Research, Australia
Strong demand for super prime CBD space
- Retail spending remained broadly stable from the previous quarter. Discretionary spending categories recorded declines in spending, with consumers pulling back most significantly on household goods.
- Retail leasing activity was resilient in the CBD, with established clothing brands continuing to expand their physical footprints.
Only one retail project reaches completion
- Retail project completions remained subdued with only one neighbourhood centre totalling 18,000 sqm reaching completion in the quarter.
- The supply pipeline is forecast to remain low over the rest of the year, with only five tracked projects due for completion.
Most sub-sectors record 12 to 25 bps yield softening
- Rents across all sub-sectors held flat on a q-o-q basis. Annually, the CBD sub-sector continued to record the largest movement with a decline of 9.81%.
- Excluding the CBD sub-sector which remained stable, all sub-sectors recorded yield softening. The neighbourhood sub-sector recorded the most significant q-o-q and y-o-y softening of 25 bps and 87 bps respectively.
Outlook: Minimal retail supply additions in H2 2023
- The futures markets anticipate the RBA to raise interest rates further in 2023, and this is likely to drive further asset revaluations and yield softening.
- Construction activity is expected to remain subdued over the latter half of 2023.