Neighbourhood retail trumps market with sales topping 110m
Neighbourhood retail trumps market with sales topping $110m
| 12 August 2020
Buyer appetite for WA neighbourhood retail centres remains buoyant, with 2020 sales topping $110 million as investors shift focus to less risk adverse assets.
Nationally, neighbourhood centres accounted for one third of total retail transactions in the first half of 2020 – compared to 16% in 2019. The trend was reflected in WA, with neighbourhood centre sales accounting for 61% of the $145 million worth of sales this year.
CBRE’s Anthony Del Borrello said neighbourhood centres typically offered attractive WALEs and secure covenants – with minimal exposure to discretionary spend.
“Transaction activity in WA this year has been mainly focused on those core non-discretionary assets that have lower occupancy risk – such as supermarkets, pharmacies, hardware, and to a slightly lesser extent, service stations,” Mr Del Borrello said.
“In contrast, prior the current downturn, investor demand gravitated towards slightly larger centres that offered diversity of income and rental growth. Now however, that diversity contains more risk, which is underpinning the shift in flight to quality.”
Major neighbourhood centre transactions in WA year-to-date include Woolworths Greenfields $32 million, Carnarvon Central for $16.1 million, Halls Head Shopping Centre for $6.3 million and Carramar Village for $33.5 million.
Mr Del Borrello said majority of recent transactions were to syndicate investors – an indication that this type of investor was now willing to reduce their return metrics in order to compete with private investors for securely leased assets.
“Non-discretionary based retail assets with strong income profiles are being recognised as strategic and relatively secure investments, which is driving buyer interest from a range of groups, particularly syndicate investors.”
Another pocket of the retail market showing resilience is large format retail – a trend supported by strong home improvement, entertainment, home office furniture spending.
According to CBRE data, preliminary retail trade figures for May 2020 saw household goods retailing up 30% year-on-year.
WA recorded the largest large format sale nationally in the second quarter of 2020, with Midland Megaplex in Perth transacting for $58 million.
Anecdotally, investor demand for large format retail centres is stable and expected to remain one of the most resilient categories in 2020-2021.
2020 WA retail sales $10m+
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