Retail on the cusp of a recovery

This quarter there are short-term upgrades to all four major sector forecasts for 2021 on the back of strong investor demand for assets, which is driving up prices. Those upgrades mean that returns in the industrial and apartments sectors will be exceptionally strong in 2021-2022 at around 15% p.a. and 13% p.a. respectively. But perhaps the bigger and more surprising story is that the retail sector is showing signs of turning a corner. As a result of the improved outlook, across the 2022-25 period, retail is our best-performing sector, led by the power centre and neighbourhood and community centre sub-sectors, with average returns in that period of 6.5%-7% p.a. Offices remain the weakest performers at a sector level, although we continue to think that Grade A stock will outperform the average.