The View | Unique resilience of Australia’s retail property deserves attention
Several factors contribute to the outperformance of the Australian retail sector, including its relative insulation from digital disruption
A decade ago, some investors believed the United States’ retail industry was going the way of the subprime mortgage market, whose collapse triggered the 2008 global financial crisis. The combination of the overbuilding of shopping centres and the dramatic rise of online shopping plunged bricks-and-mortar stores into crisis. Fears of a “retail apocalypse” were rife.
The double whammy of overcapacity and the “Amazon effect” also hit the United Kingdom’s retail sector hard, with prominent stores such as Debenhams disappearing from the country’s high streets.
Asia, by contrast, with its fast-growing middle class, was seen as a refuge from the acute challenges facing physical retailers in the Anglosphere. With much lower levels of shopping centre space per capita, and having leapfrogged Western economies in adopting online sales channels, Asia was fertile ground for retail property development and investment.
The strong performance of retail is particularly striking given that the sector was out of favour with investors globally for a long period. While retail was the world’s second most actively traded commercial property sector in 2009 after offices, it has remained in fourth place since 2018, in part due to the increasing popularity of the rental housing and industrial and logistics sectors.
However, Australia’s retail market is uniquely placed to withstand the pressures facing the sector. First, shopping centre formats are more resilient. “The fundamental difference between Australian retail and other markets is the presence of daily needs supermarkets, [with] over 90 per cent of Australian shopping malls anchored by at least one grocery supermarket,” said Simon Rooney, head of retail capital markets for the Pacific at CBRE.