First National Bank Commercial Property Finance held it’s quarterly briefing on Wednesday, and focused on the key retail property themes currently and those expected in 2022.
According to John Loos, Property Sector Strategist at FNB Commercial Property Finance:
The Retail Property Market of late appears to have been the “middle of the road” performer, sandwiched in between the underperforming Office Property Market and the outperforming Industrial Property Market.
It is important, when analyzing this property class’s prospects, to point out that it remains a relatively expensive property class by historic standards. Since the mid-1990s, it has seen very strong rental inflation, operating cost inflation and capital growth, to become expensive in every way compared to back then.
Using MSCI annual data, adjusting for general inflation in the economy to get to “real” values, real retail property net operating income (inflation adjusted using GDP inflation) had fallen by -20.9% from the peak 2015 level to 2020, while real capital value per square metre had fallen -18.8% over the same period. However, these real values in 2020 were still a massive 60.2% and 72.3% up respectively on 1995 levels.