Victoria’s retail investment property market continues to gain momentum, with the recent sale Nagambie Central Shopping Centre marking the third asset purchased by an off-shore investor in as many weeks.
CBRE’s Victorian Retail Investments team, led by Mark Wizel, Justin Dowers and Joseph Du Rieu, negotiated the sale of the property at 259-263 High Street to a Chinese investor for $7.8 million.
Located in the small township of Nagambie, approximately 100 kilometres from the Melbourne CBD, the centre was recently redeveloped to include a 2,200sqm SUPA IGA, in addition to six specialty shops.
The centre benefits from a 15-year lease to Champions SUPA IGA group – a subsidiary of Metcash.
Mr Du Rieu said the property’s strong tenancy profile underpinned strong interest during the sales process, including enquiry from more than 80 investors and eight formal offers.
“Despite being located in a town with only a permanent population of 1,500 people, the modern nature of the property together with the long term security associated through the 15-year lease generated strong investor interest,” Mr Du Rieu explained.
The property marks the third retail investment property in Victoria to sell to an offshore buyer in the past three weeks, following the sale of Bunnings Yarrawonga (5% yield) and Beaurepaires Kew (3.9% yield).
“Reflecting an initial yield of 6.1% - more than 75 basis points sharper than the recent transactions of IGA Strathfieldsaye (6.86% yield) and IGA Bittern (7.4% yield) – this sale is a strong indication that investments of this nature are becoming more attractive to the off-shore buyer market,” Mr Du Rieu explained.
CBRE’s Mark Wizel said the transaction demonstrated the heightened level of interest for IGA leased assets amid the limited supply of Coles and Woolworths-anchored assets.
“We anticipate demand from Chinese investors for supermarket and shopping centres to strengthen given the long term security and relatively low risk profile associated with non-discretionary expenditure,” Mr Wizel said.
“Following the landmark transaction of the Bunnings Warehouse in Yarrawonga to a mainland Chinese investor, we anticipate the flow of capital for premium and secure retail investment properties to continue from Asia.”
Mark Wizel went on to say that over the past 18 months, offshore interest in Victoria’s retail investment market had spiked significantly, with an average of 36% Asian enquiries for each campaign.
“Not only are offshore investors enquiring on properties in regional locations, but they now have the confidence to be buying in these areas.”
Recent CBRE’s research highlighted that foreign buyers were responsible for record retail sales volumes in 2015 - 20% higher than in 2014. Foreign buyers contributed to 27% of the total retail transactions, which have historically averaged 12% over the past 10 years.
“We were extremely pleased with the response from the buyer market, where historically properties of this nature are considered less appealing than Coles or Woolworths leased investments,” Mr Wizel said.
“Achieving an initial yield of 6.1% for an asset of this ilk is a testament to how the property was positioned in the market as the best retail investment offering sub $10 million.”
The next test of the market will be the sale of IGA Kyabram – a freestanding supermarket with a 10-year net lease to Ritchies SUPA IGA, generating a net annual income of approximately $288,000.
About CBRE Group, Inc.
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 (based on 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
