Large-format retail whets private investor appetites

Large-format retail warehouses leased to major brands on long leases whet the appetites of private investors at a packed commercial property auction in Melbourne yesterday in which average yields fell about 60 basis points.

An offering of three Melbourne showrooms with 12-year leasebacks to well-known retailer National Tiles as well as an Officeworks and a Good Guys outlet in Mildura generated $28.5 million of sales at an average yield of just over 4 per cent.

“The weighted average lease expiry across the five properties was nine years and the average price paid was 10 per cent above reserve,’’ said Billy Holderhead, a director at real estate agents Burgess Rawson, which offered the retail properties as part of a line-up of 26 essential services assets.

In total, 17 properties sold under the hammer of auctioneer David Scholes, and two sold before auction, generating a clearance rate of 73 per cent and combined sales of $74.5 million at an average yield of 4.5 per cent. This is 60 basis points lower than the 5.1 per cent average recorded last year by Burgess Rawson across $1.78 billion of sales.

Mr Holderhead said a Melbourne based private family had acquired two of the National Tiles showrooms in the Melbourne suburbs of Mitcham and Sunshine for $13.65 million on an average yield of just 3.9 per cent.

They were offered alongside a showroom in Grovedale, Geelong, by National Tiles founder Frank Walker.

Highlighting the demand for retail property on long leases, even in regional areas, The Good Guys store in Mildura, on the Victoria/NSW border, sold for $4.2 million on a yield of 3.75 per cent, a new national benchmark for freehold properties leased to the electrical and home appliances retailer, owned by JB Hi-FI Group.

Burgess Rawson estimated the 209 bidders who registered for the auction had combined spending power of $588 million.

Among the properties to sell under the hammer was the Oakleigh South premises of butchery chain Tasman Butchers. Offered with a lease in place until November 2028, it sold for $5.7 million on a yield of 3.7 per cent to a local Melbourne investor from Dandenong South.

Seven bidders and a $100,000 knockout bid pushed the two-level building to sell 21 per cent over its reserve.

Also selling were three Melbourne childcare centres, including a multilevel venue in Watsonia North offered with a new 15-year lease. It sold for $11.8 million on a 4.5 per cent yield to a Queensland-based investor.

An IGA supermarket-anchored neighbourhood centre in Frasers Rise in Melbourne’s west, offered with almost eight years left on the weighted lease, sold for $6.81 million on a 5.3 per cent yield after five bidders competed for it.

A medical investment in Shepparton leased to Goulburn Valley Imaging sold 40 per cent over reserve to a Melbourne investor, while a veterinary clinic in Burnie, Tasmania, was bought by a Sydney investor for $1.21 million.