What's in store for retail in 2013?
The rapid influx of overseas retailers is expected.
Colliers International reported:
The retail outlook for 2013 will be influenced by the impact of interest rate cuts on household disposable income, the level and intensity of price discounting by retailers and the management of operating costs by both property owners and retailers.
From an investment perspective, retail assets remain appealing. High quality, dominant shopping centres are still performing well despite the slowdown in retail turnover growth. They continue to be viewed as a defensive investment class.
Retail tends to outperform because of stable capital growth, particularly in major regional and sub-regional centres. Up until recently, the performance of retail assets was supported by the expansion of both domestic and international retailers, which in-turn drove rental growth, centre expansion and development, and sector valuations.
However, income growth for secondary retail centres may come under pressure in 2013 with new tenants paying less rent, which is starting to be reflected in valuations. Although, with their current relatively higher income yield, neighbourhood centres are expected to outperform larger format centres during the next twelve months.
Foreign capital flows into the Australian retail sector made up 18% of all offshore acquisitions during 2012, with stakes in 10 assets (>$10 million) valued at approximately $1.515 billion.
Last year saw increased demand for retail assets from offshore sovereign and pension funds. These investors have been particularly active in major sales campaigns and in seeking off-market opportunities.
We anticipate that retail property will continue to be the beneficiary of capital inflows from overseas investors, with the number of transactions to offshore groups to increase during 2013. The high relative yield spread (due to low bond yields) combined with the global appetite for low-risk investments will support this demand during the coming year.
The influx of overseas retailers to Australia is anticipated to continue apace in 2013. The charge is being led by US brands, but retailers from Europe and, increasingly, Asia are looking to expand into Australia.
For retailers from Asia who have reached a saturation point in their home markets, the Australian market is the logical next step for regional expansion. Chinese retailers will further assert their dominance in the Australian market during 2013, with numerous groups looking to open stores here.
International retailers typically look to establish a handful of flagship CBD stores supported by a network of five to 10 stores across the country, located in top performing major regional shopping centres.
As such, we expect a continued divergence in the performance of international and domestic retailers across 2013, as local players struggle with the high Australian Dollar and strong outbound tourism.
