Yields hit new low as interstate buyers take a bite of Queensland retail

Investment demand in retail assets is on the rise with yields at a record low as more interstate buyers work up an appetite for Queensland commercial property.

A new report from Ray White Commercial, Between the Lines — Queensland Retail Centre Insights (sub $20 million), shows retail centres weighted towards food retailing are the standout performers of the sector, particularly in Brisbane.

Historically low interest rates and the low cost of debt are continuing to compress average yields, which have dropped to 6.77 per cent in 2018 compared with 9.75 per cent in 2012.

Ray White Commercial Queensland investment sales specialist Michael Feltoe says sales volumes this year are significantly lower in 2018 compared with the previous three years.

Non-discretionary and convenience-based retail has continued to be the most popular category among investors seeking greater exposure in this sector.

“There is notably strong demand for centres which have a strong weighting towards food and convenience-based tenants,” Mr Feltoe says.

The report shows capital values have remained consistent since 2016 around $5250 per square metre — more than double the average $2420 value of 2013.

“With record low yields, investors are increasingly seeking centres with high rent review mechanisms and development potential as key drivers of future income growth,” Mr Feltoe says.

“Unprecedented competition by private investors and syndicates has seen yields reach levels that are below minimum return thresholds for most institutional investors.

“Throughout 2018 we expect that Queensland will continue to be a leading destination for interstate investors who see value at higher levels than local buyers.”

• View and download the report

Contact
Michael Feltoe
Investment Sales — Ray White Commercial Queensland
michael.feltoe@raywhite.com
0447 714 899