I had the absolute pleasure of taking part in the recent QIC Real Estate Investor Conference alongside my industry peers Lachlan MacGillivray, Managing Director, Retail Capital Markets (Asia Pacific) at Colliers — a specialist in major shopping centre asset sales — and leading retail industry expert and Partner at Urbis, Ian Shimmin.
In a discussion led by my QIC colleague and QIC Property Fund Senior Portfolio Manager Narelle McGhee, the panel took a deep dive into the current outlook for the Australian retail real estate market — a market that’s quickly approaching an inflection point, making it a good time to consider taking advantage of opportunities as they emerge over 2024 and 2025.
My role as the Director of Strategic Partnerships and Mandates at QIC has given me a unique perspective and vantage point, to see first-hand the evolving retail landscape.
Surplus consumer savings creates spending war chest
Ian agreed with QIC's retail house view, which highlights key factors like surplus household savings, stage three tax cuts and an anticipated soft landing for the economy, producing a resilient consumer. He also spoke about the polarisation in consumer spending, with 80% of the ~$260 billion consumer savings war chest controlled by the top ~40% of income earners,1 emphasising how important it is to adapt to shifts in consumption patterns.
Floor space shortages and the outperformance of quality retail assets
We also shed light on another critical aspect of the Australian retail landscape — the looming shortage of retail floorspace.
Lachlan pointed to a substantial underbuild of retail that occurred following Amazon's announcement that it was entering the Australian market in 2016-2017. The market concerns this caused, which eventually proved overdone, among other factors led to an underbuild in retail development.
We also talked about Australia’s positive migration story, which is a key driver of Australia’s strong population growth, and which helps make Australia an attractive capital destination for international investors.
The importance of asset quality in driving both performance and community impact was another area of conversation. Ian spoke about the pivotal role of quality in asset optimisation, linking the rental growth outlook to tenant performance. Recent benchmarks have revealed that super regional centres and top-tier assets outperform others, with spend per customer being substantially higher. It would come as no surprise that the data validates the theory that quality drives customer engagement, and plays a key role in the frequency and duration of visitation – both key drivers of sales.
At QIC Real Estate we have long championed a retail-anchored town centre strategy. Our assets are strategically positioned in high-growth areas with strong transport links and mixed-use opportunities. As I shared during our discussion, the evolving retail landscape is not solely about retail; it’s about understanding the relationship between consumer preferences, urban planning and economic factors.
Creating retail experiences aligned with the QIC Real Estate megatrends
While retail remains at the heart of QIC’s strategy, we believe integrating mixed-use elements puts us at an advantage. Our approach goes beyond retail and simply selling products; we're creating experiences aligned with the five consumer megatrends we have been tracking for some years: self-improvement and wellbeing, social and environmental consciousness, experience economy, convenience and connectivity, and localisation.
From our experience, investors today are focused on assets with mixed-use capabilities, strong transport connections, strong growth opportunities and high barriers to entry.
Opportune time emerging for quality, strategic retail acquisitions
The underlying theme here, which I think sums up the essence of this inflection point, is adaptability. As we navigate disruptions like the aftermath of the COVID-19 pandemic, adaptability becomes paramount. It’s about recognising that the current capital landscape — while in many ways still challenging — presents an emerging opportunity for strategic retail acquisitions.
Identifying the inflection point in Australian retail real estate means acknowledging the range of factors that shape our industry's trajectory. We believe that quality retail acquisition opportunities are starting to emerge, noting the operational resilience of the sector in a post Covid environment.
As we move forward, the strategic alignment of our assets with consumer mega trends, ESG opportunities, urban planning requirements and global market dynamics will continue to allow an active manager like QIC Real Estate to drive value for our investors. The pending inflection point signifies an opportunity to get set in an asset class that continues to evolve and demonstrate adaptability and innovation, as well as a gateway to access exposure to key alternative real estate sectors or living, health and education.
Image source: Eastland, VIC.
