APPD Market Report Article
SE QueenslandNovember 28, 2022
Andrew Quillfeldt, Senior Director - Research, Australia
Rising prices contribute to retail turnover growth
- Queensland’s year-on-year retail turnover figures reported growth of 8.4% for the month of August 2022. Turnover growth in the state is relatively in line with the national average (9.1%). Queensland had the third highest retail turnover growth nationally behind Victoria (12.0%) and New South Wales (8.9%). Retail turnover growth is likely being bolstered by rising prices.
- The CBD continued to lack strong foot traffic due to the low return of office workers, international students and tourists. Despite this, the number of enquiries from luxury fashion retailers seeking a presence in the CBD have increased over the past few quarters.
Construction costs continue to remain high
- Rising construction costs and labour shortages are still putting pressure on the construction industry in the South East Queensland region. Two projects (South City Square and Coles Taringa) that were due to complete in the quarter have been delayed to 4Q22 as a result.
- There are currently seven projects under construction, totalling about 94,900 sqm of retail space, due to complete over 2022-2024, including the delayed projects above. There are also about 61,300 sqm of retail developments with plans approved for 2023-2024. This pipeline is dominated by Neighbourhood Centre projects.
Yields begin to soften across several sub-sectors
- Gross rents across retail sub-sectors remained stable over 3Q22.
- Yields have begun to soften across sub-sectors. The sub-regional upper yield has softened by 50 bps while upper yields for regional and neighbourhood centres have softened by 25 bps.
Outlook: Investment market is set to slow down
- Economic volatility is anticipated to drive caution among investors. Hence, yields are likely to continue to soften across sub-sectors in the near term.
- Rising construction costs instigated by global supply chain constraints and labour shortages will likely continue to cause delays to the delivery of retail projects in the near term.