Investors have taken an interest in suburban retail assets since the pandemic

Suburban retail centres and shopping malls in Asia Pacific are still in investors’ sights, with flexible work arrangements and improving infrastructure helping to revitalise footfall.

India saw its largest retail transaction to date in February with the US$250 million sale of Viviana Mall, a 1.7 million square-foot suburban retail asset in Mumbai, to Abu Dhabi Investment Authority-backed Lake Shore India Advisory.

Suburban Shopping Mall

In Australia, the heightened interest in the neighbourhood shopping centres segment saw transactions hit a record A$2.9 billion (US$2.13 billion) last year, up 47% on the five-year average, according to JLL data.

“Retail facilities in suburban areas have benefitted from pandemic-induced reductions in travel to prime locations, which focus more on discretionary goods and shopping,” says Lee Fong, Director, Research Consultancy, JLL.

One of the major deals in Australia last year was Lederer Group’s A$300 million (US$220 million) sale of its neighbourhood mall portfolio to fund manager IP Generation.

Strong demand in the segment also convinced Australian property manager ISPT to pump A$330 million (US$239 million) into the recapitalisation of the Fort Street Property Fund, which invests in non-discretionary tenants including supermarkets, fresh food, medical and essential services.

“Suburban retail assets have typically been dominated by private investors because of the lower yields, but REITS, unlisted funds and offshore investors are now active buyers in this sub-sector,” says Andrew Quillfeldt, Senior Director, Retail Research (Australia), JLL. “The primary reason is the defensive stability of these assets and the ability to generate income amid the pandemic-induced volatility.”

These large deals come amid a resurgence in the wider retail sector across Asia Pacific. Last year, retail transactions rebounded 67% year on year, returning to 2019 levels, according to JLL’s Asia Pacific Capital Tracker 4Q21.

Finding value

While the pandemic has had significant influence on the suburban retail story, it was not the only factor that sparked the investment frenzy.

“The potential to extract additional value out of malls by converting underutilised spaces is also part of the reason why some assets are an attractive investment proposition,” says Fong.

https://www.jll.com.ph/en/trends-and-insights/investor/why-investors-are-shopping-for-suburban-malls