The slowdown in Sydney residential values through 2018 and into 2019 and subsequent decline in profitable redevelopment opportunities, (in conjunction with the low interest rate, low return environment) are providing opportunities for entrepreneurial investors to take medium to long term positions on income producing assets within a declining market in hope of future potential upside.
Investors are seeking retail investments within higher density locations around existing and proposed transport hubs with plans to create diverse mixed retail developments in these areas and provide greater consumer environments. As new residential supply subsides, on-going population growth will place further pressure on established suburban locations.
This has led to the rise of the value-add investor within the suburban retail market creating greater competition for underdeveloped assets. The cyclical changes within the development site market has seen a shift of capital flow towards investments which show future redevelopment upside.
The direction of capital is focussed towards these retail properties as high density environments are placing more importance, and consequently value, on the retail component of future mixed-use developments. Cushman & Wakefield’s analysis of mixed retail investment sales within the last 18 months demonstrates a distinct yield differential in sales which represent stronger redevelopment potential to conventional retail freehold investments.
The above is an excerpt from the Suburban Mixed Retail Market Overview 2019. Get the full data here.