• Valuable insight about the commercial real estate market has been provided by the recent quarterly reporting cycle and ongoing AGM season for the listed real estate sector. Much of this information about the environment within various sub-sectors of the market is consistent with our own experience and supports our current investment strategy and focus.
  • Looking specifically at the commentary related to retail assets, Mirvac (MGR) pointed to better performance from those centres supported by locals due to reduced consumer mobility. They noted strong evidence that where there is confidence the virus is contained; shoppers do return to centres in increasing numbers. Leasing activity has been solid in centres where operating conditions have stabilised and deal structures are comparable to those negotiated pre-pandemic.
  • Stockland’s (SGP) Retail Town Centres have experienced a recovery in retail sales levels, foot traffic and store re-openings. Not including Victoria (12% of the Retail Town Centre portfolio) these key portfolio metrics approached pre-COVID-19 levels as consumers returned to shopping centres. Total portfolio traffic is 90% of pre-COVID levels. Sales growth for 1Q21 was +1.0% compared to the previous corresponding period (pcp) and specialty store sales were down just 4.5%. This is a marked turnaround from April 2020, were sales growth was -25.1% on pcp and -60.3% on pcp for specialty stores. Rent collection was 81%, significantly higher than 4Q20.
  • The updates from these 2 operators reveal significant disparity within the retail sector. Assets which are more defensive, such as supermarkets, discount departments stores and mini-majors (includes large format stores such as Rebel Sports, JB Hi-Fi, Priceline, Dan Murphy’s) have performed well, as have assets which depend on support from local communities and in high population growth areas. Discretionary retailers, particularly apparel may not have initially performed as well, but time may provide opportunity for their recovery. This research allows us to identify segments of consumer staple retail with low volatility and creates an opportunity to use our expertise to deploy into investments that are low risk and able to achieve high returns.
  • We recently identified an opportunity to finance a consumer staple development in June. This consumer staple asset is in one of Australia’s fastest growing regions and is anchored by a Coles supermarket. The development is progressing well, with Coles and several specialty stores open and trading, while further stages will incorporate a number of well-known mini-major and fast-food retailing additions.
  • The Partners Fund retail exposure remains highly selective and we are actively pursuing opportunities to increase our diversification to the more resilient and “defensive” parts of the market such as supermarkets, particularly in attractive demographic growth regions.