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June 21, 2018

Retail investors are narrowing in on Queensland for investment opportunities, as the home of the 2018 Commonwealth Games continues to rack up transactions in a trend that shows no sign of slowing.

Queensland ranked second in transaction values in 2017 against all the other Australian states, clocking A$2.5 billion worth of retail deals according to JLL’s Australia Shopping Centres Investment Review & Outlook.

It was outranked only by NSW, which benefitted from two of the top five transactions in Australia: the Vicinity/GIC asset swap for A$1.1 billion, and the sales of Home Hub in Castle Hill and Marsden Park for A$436 million.

Without those two transactions, Queensland would have topped the league, despite its population being smaller than NSW and Victoria.

The report also attributes Queensland’s strong performance to a greater number of assets in the state compared to the other states, coupled with its many sub–cities, including the Gold Coast, Sunshine Coast and Townsville. The large proportion of Queensland-based syndicates and private developers also work in its favour, enabling greater liquidity of assets.

Another key testament to its ascendency is that despite being the third largest state by population and having the third largest share of national economic output, Queensland is the second largest market by number of assets and total floor area.

The 2018 Commonwealth Games held on the Gold Coast, has been the catalyst for a number of redevelopment projects, including the joint venture redevelopment of Jupiter’s Casino in Broadbeach by the Star Entertainment group and Chow Tai Food and Far East Consortium, worth A$850 million.

Further north, Brisbane is experiencing a boom in major infrastructure projects, including the Brisbane Live entertainment precinct, the Queen’s Wharf integrated resort development, Cross-River Rail and Brisbane Quarter.

Their combined effect on investors is reflected in AMP Capital’s purchase of a 50 percent stake in Brisbane’s Indooroopilly Shopping Centre for approximately A$800 million. At the time of the deal in November 2017, it was the biggest retail single-asset sale on record in Australia.

Attractive yields dazzle investors

Evidently, retail Investors have found Brisbane a more affordable option than Sydney and Melbourne, and have been lured by Queensland’s attractive yields over the past few years.

In Queensland’s neighbourhood sub-sector, the difference between yields in Sydney and south-east Queensland-to-Sydney has historically been around 0.3 percent on a 10-year average. At its widest, in the third quarter of 2016, it was 1.25 percent, and even though the difference has narrowed to 0.75 percent it remains wide by historical standards. A very similar trend exists between southeast Queensland and Melbourne. This indicates an economy with room to grow.

JLL’s director of Queensland Retail Investments, Jacob Swan said: “Queensland remains a very liquid market and continues to receive a disproportionate share of activity. The attractive yield spread to other states has resulted in investors seeking investment opportunities in the last few years.”

Underpinning the strong market performance in the retail sector is the state’s emerging economic prosperity, as increasing interstate migration, particularly from Sydney, boosts jobs growth, housing and other consumer demands.

This has provided a broader economic base to one that relies fundamentally on tourism. According to Tourism and Events Queensland, direct and indirect tourism accounts for 7.6 percent or A$23 billion of Queensland’s total gross state product.

Click to read about why Australia’s alternate CBDs come first for overseas investors.

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Jacob Swan

Director, Retail Investments, JLL.

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