Commercial property market to end the year on a subdued note

Retail deals are getting done but there is little other activity in the commercial sector as macroeconomic concerns take their toll.

Beenleigh Marketplace has been sold to Mintus for $85m.

The commercial property market is finishing the year on a quiet note as macroeconomic worries cloud the outlook for big investors even as a series of shopping centre sales are completed.

Property managers are disposing of mid-sized centres, partly as they look to focus more on logistics property, but also because retail is out of favour for big institutions.

This is throwing up opportunities for smaller players to jump on centres which are well located and likely to defy the economic slowdown.

In the latest wave of deals, a Dexus fund has sold a centre in Brisbane’s southeast for $85m and Stockland is disposing of a centre in Gladstone, central Queensland, for close to $140m.

CBRE’s Simon Rooney negotiated the off-market sale of the Beenleigh Marketplace for Dexus Wholesale Property Fund to property firm Mintus for $85m.

The sale reflected the rising interest rate environment and Mr Rooney said that the Beenleigh deal “demonstrates the continued demand for quality, metropolitan subregional assets with a focus on non-discretionary spending”.

Mintus could come in and remix the centre’s speciality tenants as the underused landholding provides significant scope for future development.

The 20,252sq m centre sits on a 56,290sq m site, alongside an office building and other land.

Further north, listed major Stockland is selling off a shopping centre in Gladstone for about $139m. It is being bought by property funds house Fawkner at a slim discount to the listed group’s book value of about $143m.

These kinds of assets are expected to continue performing even if interest rates stay high and could benefit from the higher inflation cycle.

Property Council of Australia chief executive Ken Morrison. Picture: AAP

They are being sought by funds houses as wealthy investors see upside in them at a time when larger department stores and centres exposed to fashion are struggling.

Stockland Gladstone is the only major shopping centre in the Gladstone region, and the 29,369 sqm centre is anchored by Coles, Big W, Kmart and Woolworths, and three mini-majors and about 50 specialty stores.

JLL’s retail team of Sam Hatcher and Nick Willis brokered the deal but declined to comment. Fawkner Property has been busy at a time when some players have been out of the market, and bought Stockland Cairns for $146m at book value last year.

Mr Willis said transactions volumes in retail were down by about 50 per cent but he expected that demand would pick up next year as well-placed retail assets performed.

ANZ senior economist Felicity Emmett.

However, macroeconomic factors have dampened confidence across Australia’s property industry, and this is prompting worries about the office market.

According to the latest ANZ/Property Council survey the overall confidence index dropped 6 points nationally in the December quarter yet remained in positive territory (113 index points) but below the long-term average (123 index points). A score of 100 in the index is considered neutral.

Property Council of Australia chief executive Ken Morrison said the industry was broadly optimistic, despite trepidation driven by external factors.

“These results are not surprising, but they do show that higher interest rates and concerns about the economy are beginning to impact confidence in this industry which employs more than 1.4 million people,” Mr Morrison said.

“While confidence remained firmly on the positive side of the ledger, this survey revealed forward workbooks are not as strong as in the previous quarters this year.”

Industry respondents in NSW and Victoria were significantly “more pessimistic” about the economy.

ANZ senior economist Felicity Emmett said sentiment was facing a trifecta of higher interest rates, rising costs and reduced access to finance.

“Firms remain more upbeat about their own prospects than the broader outlook but their optimism is beginning to fade,” Ms Emmett said. “Sentiment around hiring intentions and the activity pipeline remain elevated but are trending lower.

“Higher interest rates and the prospect of further increases are taking their toll on property sentiment. Firms remain quite negative about the broader economic outlook, with rising costs and concerns about access to finance weighing on confidence.”

The Covid-19 pandemic was expected to cause the greatest impact to the office sector, followed by the hotels, tourism and leisure sectors.