Fuelling new retail optimism
The boom in online shopping has continued to deliver blows to retail properties but a new report says some sub-sectors are producing strong returns.
“Investment demand in sector is now relatively soft compared to office and industrial, however, some opportunistic buyers are appearing,” according to Cushman & Wakefield’s October Australian Investment Marketbeat.
“2019 has marked a shift in the sentiment of Australia’s retail investors, with an increase in (potential) vendors and a reduction in the depth of purchasers. The change in conditions were recognised with declines in annualised retail investment volumes recorded for the fifth consecutive quarter.”
The report said yearly volumes were down 33 per cent to $6.4 billion, and 2019 saw the softest nine-month period since 2012. However, it said there were “rare bright spots”, especially freestanding supermarkets, where higher exposure to non-discretionary and convenience retail had increased transaction volumes by 6 per cent year-on-year.
“Liquidity at this end of the market is expected to continue to track positively,” it said.
Burgess Rawson director Billy Holderhead agreed, saying Woolworths and Coles-leased property was ‘going from strength to strength’.
“This was evidenced by a retail store leased to Coles subsidiary First Choice Liquor Market, in Werribee, which sold at our October Portfolio Auction for $7.75 million at an impressive 4.1 per cent yield,” Mr Holderhead said.
“The retail home improvement sector is also doing extremely well, and interest in properties leased to Bunnings has never been stronger. The confidence surrounding Bunnings was strongly supported by the August sale of its replacement store in Lawnton, Brisbane, for $18.68 million, representing a strong 4.68 per cent yield.”
The Burgess Rawson auctions, in Melbourne and Sydney, were headlined by the sale of 15 individual 7-Eleven service stations for almost $78 million on incredibly tight yields.
The combined events netted $135.3 million for 28 properties with a clearance rate of 90 per cent to make them among the most successful auctions the agency has conducted.
The 7-Eleven-leased assets sold on a weighted average yield of just 4.67 per cent, with four in the sub-4 per cent range. Among the 7-Eleven properties sold was one at Mornington, which changed hands for $4.9 million on a yield of 3.92 per cent.
“The 7-Eleven campaign was a success before the auction even started, with 850 enquiries across all properties,” Mr Holderhead said.
A Woolworths-leased supermarket in regional Seymour sold for $15.42 million on a yield of 5.18 per cent, marking the property’s first change in ownership since 1992.
Fast food-leased properties were also popular, with a KFC a Emerald in Queensland selling for $2.2 million, representing a 4.96 per cent yield.
Childcare’s golden run showed little sign of slowing, with two centres at Cranbourne East in Victoria and Welland in South Australia selling before auction for $4.56 million and $5.6 million, respectively.
A centre leased to Green Leaves Early Learning at Chapel Hill in Brisbane also sold under the hammer for $7.66 million.
The next Burgess Rawson Portfolio Auction will be held on 11 December at Crown Casino.
Written by Olga Galacho, The Herald Sun