Melbourne, 11 February, 2014 - Victoria’s neighbourhood shopping centre market had a bumper year in 2013, recording its strongest level of investment since the global financial crisis.
CBRE’s Victorian Retail Investments Director Mark Wizel and Associate Director Justin Dowers said in 2013, nine neighbourhood shopping centres that were offered to the market on an individual basis transacted for a combined value close to $200 million. This compares to less than $60 million worth of transactions in 2012 – equating to a 226% increase in activity across the state.
Mr Wizel said the successful sale of the Mornington Village Shopping Centre just days prior to the New Year for a tight yield of 7.47% set the benchmark for the retail investment market in 2014.
Mornington Village was sold on behalf of MAB Fund Management Ltd following a highly competitive public campaign, which saw 15 genuine offers received. A private Victorian investor acquired the centre for $25.8 million.
“2013 was certainly the strongest year we have witnessed since 2007, with both private and institutional investors directing more money than ever towards the non-discretionary, Victorian retail investment market,” Mr Wizel said.
“This level of demand is now being further amplified through the addition of Asian buyers entering into the shopping centre market.”
Mr Dowers said several additional Victorian neighbourhood centres transacted earlier in 2013 via portfolio sales including ISPT’s 75% acquisition of 19 centres from Coles, along with SCA’s recent purchase of seven Lascorp assets.
He commented: “There is no doubt that the low interest rate environment is bringing a larger quantum of buyers back into the market, however, it is the consistent performance of the major supermarkets along with the perceived stability in non-discretionary specialty shops, that is directing a lot of this interest towards retail investment property, and more particularly, neighbourhood shopping centres.”
Mr Dowers went on to say that the recent success of the non-discretionary focused retail portfolios held by Charter Hall and Federation Centres was having a material effect on the demand for these assets.
The Charter Hall retail REIT (CQR), which owns a portfolio of 74 shopping centres - inclusive of 41 neighbourhood centres - reported in its 2013 full year results a specialty tenant rental growth of 3.1% on the back of 187 new leasing deals and 139 renewals. The group also maintains an occupancy level above 98.2%.
With the Victorian population growing at record levels, investors have a renewed level of confidence in the state’s economy, and together with favourable lending terms, are able to pay aggressive prices to secure these retail investment properties, Mr Wizel added.
“While the demand for these shopping centres has never been greater, the on-going lack of opportunities that are being offered to the market is placing significant upward pressure on the prices investors are prepared to pay to secure these assets,” Mr Wizel said.
While the market has become more transactional, centres are consistently transacting in the 7% yield range, with standout results being Hogans Corner and Mornington Village Shopping Centre, with 7.3% and 7.4% respectively
Mr Dowers said providing interest rates remained at record lows, the level of demand currently being seen was expected to continue in 2014.
The Mountain High Shopping Centre in Bayswater is the only Victorian centre known to be coming to the market early this year.
Mr Dowers said the modern, fully enclosed centre in Melbourne’s eastern suburbs was expected to receive interest in line with the recent sales results due to the unprecedented levels of demand for Victorian neighbourhood shopping centres.
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