PRIVATE investors and families hold the lion share of high street retail properties in Adelaide, making it difficult for local or offshore institutions to get a foothold.
Speaking at the Australian Property Institute South Australia State of the Market, Colliers International’s associate director Kate Gray said the assets are tightly held and controlled by private investors.
“We estimate that over 70% of retail assets in Adelaide are held by private investors and often private families own several properties in the one street,”
Due to the high concentration of private families controlling a majority of assets, Gray said investment sales have been limited in the market, and attracting foreign investors is also difficult.
“Apart from the sale of the Myer Centre Adelaide to a foreign investor, we have not seeing the same level of investment as Melbourne or Sydney.
“Adelaide does not offer the scale that they are looking for,” she added.
In 2015, Singapore’s Starhill Global Real Estate Investment Trust acquired the Myer Centre in Adelaide’s Rundle Mall for $288 million.
The year 2015 was a unique and exceptional year for the Adelaide retail investment market with approximately $1.2 billion worth of properties changing hands, according to Colliers.
In 2014, transactions totalled approximately $450 million and in 2013, it was approximately $160 million. In the past nine years, sales have only exceeded the $400 million mark twice – in 2014 and 2007.
Last year, Adelaide recorded approximately $50 million in sales, highlights included Hilton Plaza for $18.5 million, Surrey Downs for $15.5 million and Windsor Gardens for $10 million.
Meanwhile Adelaide’s high streets are witnessing a renewal. For example, Gray said significant investment in the streetscape along Prospect Rd has improved the experience for shoppers.
“The facelift has helped bring shoppers to the precinct as a place to linger,” she said.
Currently The Parade has the lowest vacancy rate under 3%, followed by Rundle Mall with 3.5%, Rundle St circa 3.6% and Prospect Rd with circa 4.5%.
Gouger St has a high vacancy of circa 8.5%. Not surprising, Colliers found Gouger St has difficulty retaining tenants with a high churn rate of 23%, in comparison Rundle Mall has a churn rate of 11%.
Whilst Rundle St boasts a low vacancy rates, it has a high churn rate of 25%, but that could suggest that the precinct is trying to find the right tenant mix.
“The churn rate indicates the stability of the tenant mix. It is unsurprising that Rundle Mall tenants don’t move.
“A high tenant churn rate does mean that a precinct is not retaining tenants. You might find in Gouger St, the tenancy mix is food and restaurants and these operators tend to change,”
On the supply side, Gray said large format retail is driving demand for new retail space, as well as shopping centre extensions. Although with the lag in construction, around 23,500 sqm of space will be added in 2017.
New supply is expected to skyrocket to in excess of 145,000 sqm in 2018.
Australian Property Journal
