APPD Market Report Article

SE Queensland

December 1, 2021


AUD 1,486


Retail turnover growth continues to slow

  • Queensland’s year-on-year retail turnover growth has fallen considerably from a 30-year peak of 12.8% in April 2021 to 8.7% in August 2021. Turnover growth in the state remains above the national average (7.1% y-o-y) and is the third highest of all states behind Western Australia (10.9% y-o-y) and the Northern Territory (10.8% y-o-y).
  • Retail turnover growth in Queensland has been driven by annual growth in clothing, footwear and personal accessories (18.5%), cafes, restaurants and takeaway food (17.2%), and household goods (10.3%). The rebound of these categories is reflective of how well the state has been able to contain COVID-19 cases and largely avoid tighter restrictions.

Delays in the delivery of projects from rising construction costs

  • Rising construction costs and delays in council decision making have caused a slow-down in the delivery of projects. The predicted completion dates for a large number of projects have been pushed out to account for these factors. Queen Street Village, a large mixed-use project in Southport, was set to complete this quarter but has been pushed out for completion for 4Q21.
  • The supply pipeline remains moderate. The pipeline over the short term is dominated by large format retail (38%) and neighbourhood centre projects (38%), with ‘other’ retail covering the remaining 25% of projects. The high percentage of large format retail and neighbourhood centre projects is a reflection on how well they are performing in the current economic climate.

LFR & Neighbourhood Centres continue to outperform

  • Declining gross rents across regional (-0.3%) and sub-regional (-0.3%) sectors have continued over the quarter, reflecting reductions in foot traffic and weaker leasing demand. Large format retail and neighbourhood centres recorded moderate growth of 0.5% and 0.1% in gross rents respectively as both sectors continue to dominate retail market activity.
  • Yields across the retail sub-sectors remained largely flat over the quarter, with the exception of neighbourhood centres recording a mid-point yield decompression of 0.5 bps. This is supported by the strong investment demand seen since the onset of COVID-19 and the sub-sector’s ability to provide non-discretionary goods over lockdowns.

Outlook: Investment interest in sub-regional assets expected in near term

  • Increased speculation of the Queensland borders reopening by the end of the year will likely see retail spending rebound over the next 12 months. This is supported by an expectation that consumer sentiment and discretionary spending will continue to improve given the increase in vaccination rates and expected wage growth.
  • Strengthening of the investment market will continue, with syndicators being a major driver. We expect large format retail and neighbourhood centres to remain in strong demand given their non-discretionary tenant mix. Sub-regional assets have seen increased counter-cyclical investor interest this year and we expect yield compression for these assets in the near term.

Note: SE Queensland Retail refers to South East Queensland's overall retail market.

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