This article is from the Australian Property Journal archive
BUYER appetite for neighbourhood shopping centres dominated the Western Australia retail market in the first half of 2020, as investors across the country shifted focus to less risk-averse assets during the pandemic.
Total retail investment activity totalled $833 million across Australia, according to CBRE, down on the $2.7 billion recorded in the first half 2019. Investment volumes are expected to remain constrained in 2020 as uncertainty looms over the economy.
Neighbourhood centres accounted for one third of total retail transactions across the country, compared to 16% in 2019. In WA, with neighbourhood centre sales accounting for 61% of the $145 million worth of retail sales during the six month period, totalling $110 million.
Major neighbourhood centre transactions in WA so far this year include Woolworths Greenfields for $32 million, Carnarvon Central for $16.1 million, Halls Head Shopping Centre for $6.3 million and, most recently, Carramar Village for $33.5 million. All of them were picked up by syndicators.
Yields ranged from 5.74% for Woolworths Greenfields to 7.89% for Carnarvon Central.
CBRE’s Anthony Del Borrello said neighbourhood centres typically offered attractive WALEs and secure covenants, with minimal exposure to discretionary spend.
“Transaction activity in WA this year has been mainly focused on those core non-discretionary assets that have lower occupancy risk – such as supermarkets, pharmacies, hardware, and to a slightly lesser extent, service stations.
“In contrast, prior the current downturn, investor demand gravitated towards slightly larger centres that offered diversity of income and rental growth. Now however, that diversity contains more risk, which is underpinning the shift in flight to quality.”
He said the majority of recent transactions being to syndicate investors indicated that this type of investor was now willing to reduce their return metrics in order to compete with private investors for securely leased assets.
“Non-discretionary based retail assets with strong income profiles are being recognised as strategic and relatively secure investments, which is driving buyer interest from a range of groups, particularly syndicate investors.”
Shopping centre asset sales across the country tallied $691 million in the first six months of 2020, less than half of the $1.46 billion over the same period last year. YFG’s $285 million purchase of Mount Ommaney contributed heavily.
Large format retail has also shown resilience, supported by strong home improvement, entertainment, and home office furniture spending.
Preliminary retail trade figures for May saw household goods retailing up 30% year on year. WA was home to Australia’s largest large format sale in the June quarter, with Lester Group buying Midland Megaplex in Perth for $58 million. Three sales were recorded nationally in this period, totalling $124 million, down just 3.9% year on year.
In contrast, only one CBD retail sale was recorded nationally during the quarter. A three-storey retail and office building in Melbourne, at 41-45 A’Beckett St, sold for $7.7 million. The second quarter of 2019 delivered about $333 million of sales in this category.
