Welcome to this week’s Property News.
Strong valuations gains are being are being announced by many of the AREITs in the lead up to the end of the financial year. This week Dexus, Charter Hall, Aventus, and Vicinity announced their latest valuations.
The key results, shown in the table below, reflect lower or negative growth in the traditional retail sector and strong growth in the large format retail, industrial and alternative sectors. The strong flow of capital into real estate is being seen across most sub sectors of real estate and point to ongoing support for valuation growth.
The sale this week of Mirrabooka Square for $195m adds to the growing sense that there is capital support for the right regional and sub regional centres. This sale reflected a 6.97% yield and follows AMP Capital’s sale of Raymond Terrace Marketplace for $150m on a 5.6% yield and also the Lederer Portfolio of Neighbourhood Centres which recently sold for $300m on a 6% yield. These transactions have given the confidence to QIC, Lendlease and Vicinity to pursue the sale of regional centres. QIC is selling their half stake in Westfield Helensvale, Lendlease are seeking a buyer for a 50% interest in Harbour Town and Vicinity’s are selling 100% of Mount Pleasant Shopping Centre.
Retail Centres are not out of the woods yet, and as just as Melbourne emerges from early June lockdown, it is now Sydney’s turn to bunker down for 14 days. The affects of COVID will continue to felt in the retail markets until the country has a sufficiently vaccinated at least 50% of the population. The May retail sales results announced this week showed just a 0.1% increase in traditional retail turnover and June is likely to show a slight decline. Consumer confidence is however unphased by the short term COVID disruptions, predominantly due to the low unemployment levels and the surging housing markets. Through the year, household wealth grew 15.3% to March, which is strongest through the year growth since March 2010. We therefore expect retail expenditure to bounce back strongly once COVID comes under control.
The above conditions continue to support our current preferred investment strategy ie we continue to favour investment or development property underpinned by long term secure tenants who rely on non discretionary consumer expenditure. These include neighbourhood convenience retail, medical & health facilities, education and child care services, fuel & automotive services. The ability to capture increased income that comes with economic growth and inflation or the reversionary value that is associated with these are important. Assets with access to market rents in 4-5 years time are likely to be more valuable than those with much longer term leases.
As you would expect, we are still cautious on CBD office, hotels, regional and major / regional shopping centres but expect there will continue to be opportunistic buying that can deliver good yields.
If you have any news, information or research reports you’d like us to share with the market, please feel free to send me an email at info@propertymarkets.news.
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