APPD Market Report Article
Melbourne
February 22, 2024Andrew Quillfeldt, Head of Capital Markets Research, Australia
0.0%
AUD 1,505
Rents
Stable
Rents remain stable across all sub-sectors
- Monthly retail trade growth for November 2023 was recorded at 2.4% (up from -1.1% in October 2023). The strongest growth was recorded in clothing (6.3%) and department store (5.8%) spending as consumers took advantage of Black Friday sales.
- Although the pace of finalising leasing deals remains slow, operatives have anecdotally stated that leasing demand from franchises has improved and mini-majors remain opportunistic.
Five projects totalling 22,600 sqm reach completion
- Supply additions totalled 22,600 sqm across five projects over the quarter, a slight uptick from previous quarters.
- Only 41,000 sqm of new retail space was added to the market in 2023, 60% less than the ten-year annual completion average.
Yields remain stable across all sub-sectors
- Over the quarter, yields remained stable across all sub-sectors. However, yields across all sub-sectors softened between 6 and 37 bps annually.
- Transaction volumes totalled AUD 1,708.3 million in 2023, a 62% increase from 2022.
Outlook: Construction costs to remain a headwind to the supply pipeline
- Construction activity is expected to remain subdued over the short to medium term due to high construction costs.
- Households are likely to continue pulling back on discretionary spending given ongoing cost-of-living pressures.
