Optimistic outlook for Australian retail
While retail rents are looking up for Australia, the lack of international tourists will continue to be a problem, according to UBS.
The move to e-commerce and lockdown restrictions had previously been a hindrance for retail properties but, in its latest real estate report, the investment bank said Australia had fared better than other countries as it was among the first countries to relax lockdown measures.
“On a three-month moving average basis, Australia’s retail sales growth was still in positive territory, boosted by a record surge in retail spending in the month of May alone.
“The scenes of shoppers trawling the malls and sipping on cappuccinos at cafes offered glimpses of how successful suppression efforts can kickstart economic re-opening.
“While things appear to be looking up for Australia, the dearth of inbound tourists and weak retailer sentiments were barely offset by the timely relaxation in social restrictions, which led to a prime high street rents staying flat too. However, Sydney shopping centres saw a 5.1% year-on-year decline in rents.”
This compared to losses of 36% year-on-year for Hong Kong prime retail rents as the country had been hurt by the ongoing political and social tensions, as well as the COVID-19 pandemic, despite being able to flatten the curve without a total lockdown.
The firm said the market was expecting further clarity to assess the full impact of COVID-19 on the retail sector and that there would be a bigger impact at the end of the year.
The best-performing Australian retail property firm was Charter Hall which had returned 16% since the start of the year, the only one of the major players to report a positive return over the period.
According to FE Analytics, there were only two funds within the Australian Core Strategies universe, which held exposure to Charter Hall Group. These were Antares Listed Property and Resolution Capital Core Plus Property Securities II.
A further 12 funds had exposure to Charter Hall’s Retail REIT; Ausbil Active Sustainable Equity, Ausbil Australian Emerging Leaders, Bennelong Kardinia Absolute Return, CFS FirstChoice Wholesale Property Securities, CFS Colonial First State Wholesale Property, Ironbark Paladin Property Securities, Lazard Australian Defensive Equity, Legg Mason Martin Currie Property Securities, Legg Mason Martin Currie Real Income, Pendal Property Investment, SPDR S&P ASX 200 Listed Property and Zurich Investments Australian Property Securities.
The Charter Hall Retail REIT invested in high quality Australian supermarkets, convenience stores and shopping centres.
AUTHOR
Laura Dew
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