THE PROPERTY DEVELOPMENT REVIEW
and what’s your outlook for 2025? Retail investors are aware that 2025 will provide a lot more stability than in previous years. Greater confidence across interest rates, politics, inflation, yields and construction costs gives investors a higher conviction in their forward outlook will translate into increased buyer activity, which we anticipate will continue throughout 2025.
Which asset classes do you anticipate leading the charge in 2025, and what factors will drive their performance? The retail asset classes that are receiving the greatest buyer attention across private, institutional, superannuation and syndicate investors are your mid-market neighbourhood shopping centres and large-format retail centres. These two retail sub-sectors have seen very low vacancy rates, positive rental spreads and the supermarket-anchored centres providing higher rental returns relative to historical averages through percentage rent growth. In Victoria, very few opportunities have been brought to market in the last 24 months, and with supply constraints, we expect to see yield compression in these retail sub-sectors. In the development site space, do you see more activity opening up in 2025, given the potential for interest rates and construction costs to stabilise or decline? In 2025, we expect to see selective opportunities in core retail development sites. De-risked sites with strong tenant demand will continue to be highly sought after, regardless of the market cycle. Conversations with developers who are actively tendering or managing multiple projects indicate that construction costs have decreased by 5%- 10%. This reduction is promising for project feasibility and is likely a result of several projects being paused, allowing builders to take on new projects with increased capacity. In closing, the market faced challenges in 2024, including financing constraints, supply chain pressures, and evolving ESG requirements. Are there signs of relief,
February / March 2025 – 45
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