This article is from the Australian Property Journal archive
FUND manager and property developer Accord has snapped up the HomeCo Parafield large-format retail centre in northern Adelaide for $28.5 million in an off-market deal.
Anchored by Officeworks, the centre is 100% leased to national tenants across 15,571 sqm with a 3.7-year weighted average lease expiry. It sits on a 37,122 sqm site adjoining Parafield Airport.
“The centre provides an attractive mix of income and value growth potential based on strong underlying fundamentals, while also benefiting from compelling tailwinds we observe in the large-format retail sector,” said Lachy Hogarth, managing director at Accord.
The sale was brokered by Colliers’ agents Tim McIntosh and Jordan Schmidt.
McIntosh said Accord was identified as the off-market purchaser of HomeCo Parafield following their strong interest in recent Victorian assets that were marketed publicly, such as Chirnside Lifestyle Centre, which sold last year for $50.4 million to IOOF.
Other recent examples of new buyers entering the sector include Blackfox Property acquiring of Officeworks-anchored Shepparton Retail Hub in Victoria for $11.61 million.
According to Colliers, investors are currently attracted by the high-yielding large-format retail (LFR) sub-sector as it provides a materially higher investment return when compared to industrial, neighbourhood shopping centres and supermarkets. Data from the firm shows that over the last decade, the average yield for LFR relative to other sectors sits at 7.46% compared to 5.84% for the Industrial sector, 6.14% for neighbourhood shopping centres and 5.58% for supermarkets.
Over the same timeframe, LFR gross rents have only seen a 13% growth, while industrial prime rents have increased by 85%. This has seen the cost arbitrage for retailers to store their goods off-site materially close.
“Investors are in recent times, seeing attractive rental growth, greater depth of retailer demand and a growing requirement for larger spaces. Buoyed by strong sales, retailers are opting for bigger stores with a larger back-of-house to manage omnichannel sales,” McIntosh said.
LFR rents in 2014 were 2.7 times higher than prime industrial. Today, they are just 1.7 times, before factoring in the cost of logistics with the goods being stored off-site.
McIntosh said the gap between LFR rents to industrial rents has changed materially over the last decade.
“Retailers have recognised it is more cost-effective to have larger retail stores where they can optimise their omnichannel sales across in-store, click and collect and last-mile delivery as transport costs and industrial rents limit the value arbitrage of storing off-site.
“Some investors have recognised retailers are leading the growth in the sector, with strong sales over the last four years seeing tenants opt for larger store footprints and a willingness to pay higher rents after a stagnant decade of limited rental growth, while yields remain highly attractive relative to other investment sectors.”
