Thematic investing

Thematic investing is a strategy that seeks to identify and benefit from long-term structural trends that shape the economy and society. These trends - such as demographic shifts, technological disruption, and evolving consumer behaviour - can create compelling opportunities for real asset investors.

In 1960, retail trade accounted for 56% of household consumption. By 2023, this had dropped to just 33%, reflecting a significant shift in consumer behaviour away from goods and toward services. The Fund’s retail portfolio is well-positioned to respond to and benefit from this and other mega-themes reshaping the Australian retail landscape.

Shape shifting

Retail is a sector in perpetual evolution. While traditional discretionary retail has faced headwinds from online competition, a new wave of retail is emerging - one that is service-oriented, experiential, and deeply embedded in local communities. Over the last decade, the Fund’s retail properties have been actively positioned to align with this evolution: tenants offering generic goods that have proved susceptible to online competition have been jettisoned in favour of contemporary businesses offering personal services; there’s been an uplift in the quality and presentation of fresh food; the centres have been activated as social hubs staging movie nights, celebrating cultural festivals and embracing all facets of the local community; and there has been step-change in the level of design excellence and ambience.

Placemaking

Modern retail is about more than transactions – it’s about experiences and feeling like you’re a part of a community. Rather than suffocating local town centres, the ubiquitous rise of all things digital has enlivened them. The more gigabites we consume, the more we depend on the places we can connect ‘IRL’ (in real life). Retail centres that integrate dining, wellness, entertainment, and modern services are thriving. These uses increase dwell time, drive repeat visitation, and enhance asset desirability.

In this environment, placemaking is critical. This is a collaborative process that involves planning, designing, and managing public spaces to create vibrant, inclusive, and engaging environments that reflect the needs and aspirations of the community. It goes beyond just physical design – it’s about fostering a sense of place and belonging. Consumers are seeking places that are imaginatively designed, activated and that house spaces that are both sophisticated and fun. To attract customers, centres must be destinations that people want to come to.

Investment proposition

Urban retail centres are attracting growing interest from investors, and for good reasons. Demand is being supported by strong population growth and low unemployment. Supply is constrained by high construction costs and limited land availability.

Prices have reset and relative to tenants’ revenue, rents are starting to screen as cheap in a few markets.

Transaction activity is lifting as investors position for a period of returns which are expected to be cyclically strong but where the long-term returns are also underpinned by inflation and population growth in land-constrained cities.

Curated portfolio

The Fund’s retail portfolio consists of four centres located in Brisbane, Gold Coast, Sydney and Melbourne. With a long-term occupancy rate of 98% and a rent-roll consisting of over 250 tenants, the role of this portfolio is to deliver a reliable income stream which can confidently be expected to keep pace with inflation over time.

The Fund’s centres offer a mix of essential retail, fresh food, healthcare, and personal services in settings which have been designed to cater to their own local markets. Anchored by major supermarkets, the portfolio consistently achieves near-full occupancy, reflecting strong tenant demand and long-term resilience. Over a long period of time, the income out of the retail portfolio has supported a steady stream of quarterly distributions to the Fund’s investors.

The portfolio’s strength lies in its focus on accessibility, community relevance, and tenant diversity. Centres are positioned to drive consistent foot traffic through a combination of practical offerings and experiential elements that foster customer loyalty. Many assets incorporate open-air layouts, dining precincts, and lifestyle services that enhance the customer experience and encourage repeat visitation.

Future proofing

Over the last decade, the Fund’s retail portfolio has been actively curated to align to the major shifts which are playing out now. But what about the future?

Retailers are exploring ways to leverage generative AI to create hyper-personalised shopping experiences. From tailored product recommendations to dynamic pricing and predictive inventory, AI is transforming how consumers interact with brands. Platforms like TikTok Shop and Instagram Shopping are becoming core retail channels, especially among Gen Z. Consumers are increasingly demanding visibility into how products are made, sourced, and delivered. Eco-conscious shopping is no longer niche: the rise of second-hand luxury, rental models, and sustainable packaging reflects a broader shift toward circular economy principles. And physical stores are evolving into immersive environments that blend shopping with entertainment, education, and community engagement.

How this all plays out is not clear. But if we look back in time – whether that’s five years or 50 years, it’s clear that well-located shopping centres have proven incredibly adept at accommodating the major thematic of the time: be that the take-up of the family car, the advent of the internet or the proliferation of the smartphone. For these reasons, we see the Fund’s retail portfolio as a sound long-term investment which is set to perform well in the short term.