For the first time in nearly two decades, retail assets have seen the largest portion of all commercial
transactions. According to JLL Research, retail transaction volumes reached $6.25 billion over the course of 2023, which made up 36 per cent of all commercial sales. Over the same period of time, office transactions fell away to make up just 30 per cent of all sales ($5.14 billion), while industrial transactions notched up 34 per cent ($5.92 billion).

JLL Retail Investments Australia and New Zealand Senior Director, Nick Willis, said it has been a strong
turnaround for retail over the past 12 months. “In a year of subdued transaction volumes in global capital
markets, retail property in Australia has for the first time in 20 years been the most liquid sector with over $6 billion transacted, demonstrating the returning capital demand,” Mr Willis said.

Mr Willis added, “Whilst formal on-market offerings for retail assets were significantly constrained in 2023, the weight of capital drove a year dominated by off-market transactions led by buyer mandates. Globally, the performance of the retail sector is driving renewed interest, and whilst the majority of this capital is focused on higher return opportunities, core capital is re-engaging given the attraction of the robust underlying fundamentals of the asset class.”

JLL Research found that the final quarter of 2023 accounted for almost 60 per cent of the $5.52 billion worth of transactions, suggesting buyer interest surged late in the year. In 2023, local fund managers and syndicator capital across all retail sub-sectors accounted for more than 40 per cent of total sales. Mr Willis said managers had identified value in the regional and sub-regional sectors last year. “However, further to syndicate capital activity, the higher cost of debt has increased participation from ultra-high net worth investors who have a lower cost of capital, including the recent sale of Rosebud Plaza to a Sydney private for $134.5 million,” he said.

Head of JLL Retail Investments Australia and New Zealand, Sam Hatcher, said the increased demand for retail assets was backed up by strong tenant performance along with tight supply. “Further, funding for retail remains positive given the diversification of income providing stable interest cover ratios compared to other traditional asset classes which are often linked to one or two major tenant expires,” Mr Hatcher said.

Head of JLL Capital Markets Research Australia, Andrew Quillfeldt, said retail led the other sectors last year. “Retail transaction volumes were only down by 8 per cent, year-on-year, compared with -41 per cent across all sectors, reflecting the slew of deals occurring in late-2023,” Mr Quillfeldt said.

“While the outlook for rates has been volatile, global capital markets are now reflecting lower official cash rates for many of the major established markets, which is helping to improve conviction in underwriting future funding costs for real estate investors and that the current round of monetary policy tightening from central banks may have concluded.”