A strong tourism market coupled with above average population growth rate and strong residential sector has helped support the retail property market over the last year across the Gold Coast. Major projects in the pipeline such as the light rail extension to the main commuter rail, the $970 million Jewel by Dalian Wanda Group, $1.4 billion integrated residential resort Ruby, the completed upgrades and extensions to Pacific Fair Shopping Centre and Robina Town Centre along with the transformation and future development at The Star Casino at Broadbeach is encapsulating a rejuvenation of retail across the Coast. Demand remains strong for Coles and Woolworths anchor based centres where the number of specialties remain at a minimum. Investors are becoming more selective, especially where majority of income is not sourced from a major. In short supply but high demand however are prime grade retail shopping centres possessing a strong leasing covenant located in regions displaying strong population growth forecasts.
With a significant amount of cap rate compression having already occurred, and the outlook for inflation and rates somewhat uncertain, investors are becoming more selective in terms of asset acquisitions, particularly those that are secondary in quality. As a result, we believe the outlook for further cap rate compression in smaller secondary grade assets is muted and are likely to stabilise over the coming year.
Chinese investors have set their sights on Gold Coast as well. Here are some of the projects they’ve invested in:
The Chinese company Songcheng Performance Development is building the “Australia Legend Kingdom” theme park on the Gold Coast, valued at A$400 million.
2 Chinese companies, Dalian Wanda and Ridong Group, and Brookfield Multiplex have teamed up to construct a Jewel resort worth USD900 million on the Gold Coast.
The ASF group, a public Australian company, in collaboration with China State Construction Engineering, is proposing to build the Gold Coast Integrated Resort an AUD$3 billion project on the Gold Coast.
Forise, a Chinese development firm, is constructing an 87-storey A$1.2 billion luxury apartment tower on Gold Coast.
Retail sales growth figures have been quite volatile in Queensland ever since Cyclone Debbie hit the data in March this year. The most recent data from September saw sales move back into positive territory, up 0.26 per cent month on month, equating to a gain of 0.23 per cent year on year. This compares to the national average of 1.44 per cent, New South Wales’ gain of 2.34 per cent and Victoria’s gain of 2.29 per cent over the year. A reflection of these figures, CBD retail leasing remains challenging particularly for secondary grade stock located in inferior locations. Retail turnover for Queensland’s cafés and restaurants recorded negative year on year growth in September 2017 at -4.33 per cent.
Recent deals in food courts located on the periphery of the CBD are being transacted with incentives of between 12 and 20 per cent. On a more positive note, however, Queen Street Mall fronting tenancies continue to attract strong interest from global and national based retailers, rents remain stable and vacancy remains relatively tight. Prime Grade high street net face retail rents for product sub 250 sqm remained steady over the quarter at an average of $4,700/sqm and incentives at an average 12.5 per cent. Prime Grade high street retail net face rents in Brisbane’s CBD have grown 5 per cent year on year to Q3 2017.
Currently under construction, the Queens Wharf development is set to rejuvenate retailing in Brisbane City. The development however is set to create increased competition for the established high-end luxury tenancies within the city’s centre. Although the Queens Wharf Integrated Resort is not forecasted for completion until 2022 to 2024, the anticipation of its release is already placing pressure on the owners of Brisbane’s highend retail tenancies. Global high-end luxury brands considering opening in Brisbane are now contemplating either putting plans on hold until space becomes available at Queens Wharf and/or negotiating their renewal around the developments completion.
Additionally, landlords operating within this space such as the emerging Edward Street precinct may come under pressure to retain their existing tenants by offering either higher incentives, affordable rents, and/or a combination of both. A recent example of this is the recent Hugo Boss deal which was struck at circa $5,000/sqm with a generous incentive. This recent deal may set a precedent and see some landlords in the Edward Street precinct look to review their previous record $6,500/sqm retail rates. Furthermore, there is also the threat that the opening of the Queens Wharf development may also redirect tourist foot traffic from Queen Street Mall to the new development.
Source: Colliers International Research and Forecast Report Last Quarter 2017