This article is from the Australian Property Journal archive
PROPERTY yields for Melbourne neighbourhood and sub-regional shopping centres are currently hovering between 7.5% and 9%, and could fall to 6.5% in the year ahead, as more investors focus on non-discretionary retail investments.
According to Savills, 97 retail properties totalling $1.9 billion changed hands in the year to December – up 250% on the $560 million recorded in the previous year.
The sales figure is the highest in seven years and is substantially higher than the $1.22 billion five-year average.
Savills’ Victorian retail sales executive Pat De Maria believes 2014 maybe another record year, in terms of total value of assets sold.
“We are going to see another strong year if, as we expect, the high number of off market deals continue to be driven by the significant weight of money chasing non-discretionary retail based centres.
“Some of this money will come from institutions looking to bolster portfolios, some will come via an injection of funds from passive investors,” he added.
De Maria also expects offshore players to enter the field, in capital-partnering ventures looking to take advantage of local retail management expertise.
Just last week, Singapore’s Sim Lian Group bought five neighbourhood shopping centres from Woolworths for $133 million, in a sign that offshore buyers are broadening their investment mandate beyond CBD office assets. The portfolio includes two centres, Lake Munmorah (5,669 sqm) and Jordan Springs (6,248 sqm) in New South Wales, a further two – Lucas (5,511 sqm) and Tarneit Gardens (6,427 sqm) in Victoria
Savills Victorian head of research Glenn Lampard said buyers in 2013 had been largely local with trusts and funds accounting for 46%, private investors 26% and foreign investors 26%.
Private investors were the most active with 64 or nearly two-thirds of all purchases.
According to Savills, $630 million worth of transactions were in the $100 million plus price range, accounting for a third of the total value $1.9 billion of retail property sales. While the $2 million to $10 million range accounted for the higher number of transactions at 58 or almost 60% of the number of sales.
The largest single transaction had been the sale of Lend Lease/APPFs regional centre, Greensborough Plaza, to Blackstone Group for $360 million at a reported yield of 7.25%.
“A feature of the Victorian retail investor market for the 2013 calendar year was the number of off-market and portfolio sales, predominantly for centres in the Neighbourhood category, with ISPT and SCA Property Group being quite active,” Lampard said.
De Maria expects the strong competition for assets will put pressure on yields for high quality neighbourhood and sub regional assets.
“While yields for Melbourne retail centres are currently in the 7.5% to 9% range, as 2014 comes to a close the scramble for the best assets will undoubtedly see yields firming further and 6.5% is not out of the question,” De Maria predicted.
Property Review
