Demand for retail assets bounces back

Buyer demand for retail assets has bounced back over the past 12 months, with sales volumes now at the highest level since 2015.

REA’s latest 2021 PropTrack Retail Snapshot shows that retail sales volumes are now back above where they were prior to the pandemic.

The report notes that retail investors are continuing to look for assets tenanted by ‘pandemic-proof’ businesses with a lower risk of vacancy.

REA has stated that searches to buy retail assets strengthened over the course of 2021, peaking in October before easing off into the holiday period which is typically the seasonal low for real estate transactions. Commercial real estate loans have also seen growth.

However, in Australia’s two largest markets – Sydney and Melbourne – the number of searches to lease retail property peaked in March 2021 and has been trending lower on the back of lockdowns.

Where are investors looking to buy?

Investors are becoming increasingly active in the market with Sydney the most sought-after location in NSW, accounting for 4.7% of all searches in 2021. This figure is up from 3.3% in 2020.

Investors are slowly returning to other major markets, while remaining cautious. Melbourne’s share of searches has fallen from 4.8% to 3.4% over the past 12 months. Similar declines were seen in other capital cities over the past 12 months, including Adelaide (18.8% to 17.8%), Perth (6.6% to 3.8%), and Hobart (8.2% to 5.1%).

One of the key findings from the report was that investors are continuing to look for assets with tenants already in place.

Searches for ‘tenanted investment’ have increased by 98% over the past 12 months to become the most searched for phrase on REA platforms. Searches for ‘high yield’ have also risen 1,010% over the same time, highlighting the hunt for income in the current low-interest rate environment.

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