Sydney, 4 August 2013- Activity in the Australian bulky goods sector has slowly start to rise, with opportunistic investors emerging to capitalise on wide yield spreads according to CBRE’s latest Australia Retail Marketview.
Chris Parry, Associate Director, Head of Bulky Goods said that a niche group of investors including BBRC, Arkadia, Primewest, Blackstone and Sentinel were driving activity, with recent acquisitions including the Logan Mega Centre (QLD), Auburn Megamall (NSW) Home HQ, Nunawading (VIC) at $48million representing a Net Passing Intial Yield of 11.1%..
“These investors are seeing the asset class as undervalued due to the significant spread between yields and funding, which will only last for a limited time,” Mr Parry said.
Nationally, construction of traditional, multi-tenanted bulky good centres has slowed, which Mr Parry said offered opportunities for landlords with existing centres to diversify their retail mix or backfill existing vacancies.
Victoria will account for over 50% of new construction, with 270,000 sqm of bulky goods space due to be developed in the state in 2013.The CBRE report highlights that Masters and Bunnings dominated construction activity during both 2012 and into this year and will account for an expected 23% of new bulky goods development in 2013.
There has been a slight downward pressure on bulky goods rent nationally, however with increased competition between several major local players and also international giants such as Costco and IKEA, who are both expanding in Australia, rents are beginning to stablise.
Vacancy rates for prime stock remained throughout and post the G.F.C. and this trend continues, as retailers flock to centres with strong fundamentals. Mr Parry said retailers were recognising that prime assets had stablised and that a recovery in retail spending, as well as the modest housing recovery, could strengthen the performance of these prime centres.
“We believe that we are at the bottom of the curve for bulky goods yields and with improving market conditions, lack of new supply and the diversifying range of retailers in this asset category we would envisage that yields shall stabile and gradually improve,” Mr Parry said.
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CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website atwww.cbre.com.au.