Rental growth continues to be subdued with only stable or modest growth in each sub-sector. Prime face rents have generally remained stable with some decreases in secondary rents, a consequence mainly due to an increase in vacancies. Whilst face rents generally remain stable, effective rents have fallen as landlords offer incentives to entice good tenants on favourable terms. The near term outlook for retail rents is for them to remain stable.
The past 24 months has seen a large decompression of yields as investors fled the market to the safety of cash and cash equivalents. This movement was varied and depended greatly on the sub-sector, the location of the property, the strength of tenant and the tenancy mix. Prime yields have softened by between 0.5% and 1.0% with secondary yields softening by 1.0% to 2.0% which has brought the yield spread between prime and secondary properties to more traditional levels. Yields have generally stabilised across the sub-sectors.
Brisbane CBD yields ranging from 6.25% to 7.25%, prime neighbourhood centres with a Coles or Woolworths major ranging from 7.00% to 8.00% and well located convenience centres with a strong tenancy mix are also achieving yield ranging from 7.00% to 8.00%. secondary yields are between 8.00% and 9.00% with others above 9.00%.
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Source: Herron Todd White