Investor Confidence in Supermarket Assets Pick Up

Supermarket giant Woolworths has continued the quick-draw sell-down from its retail property portfolio with the sale of two shopping centres in NSW and Victoria.

Both Woolworths and rival Coles have been in the process of divesting assets in recent years, offering them for purchase with long-term leases installed.

Earlier this year, the grocery retailer individually listed four properties across the country, all anchored by Woolworths supermarkets on long leases.

Woolworths, now widely considered one of the most defensive companies in the wake of the coronavirus crisis, has seen its popularity skyrocket over recent weeks due to panic buying.

Food spending has risen almost 50 per cent year-on-year, with sales in supermarkets and grocery stores lifting by 74 per cent.

A local Victorian investor has also picked up the newly-built Keysborough South Shopping Centre in Melbourne’s east for $33.13 million, anchored by a Woolworths supermarket and complemented by eight specialty shops. 

The single level, 5,437sq m centre is situated within the City of Greater Dandenong, where the residential population is expected to surge by 20 per cent within the next 10 years.

CBRE agents Justin Dowers, Mark Wizel and Kevin Tong managed the sale of the centre which holds a 10 year lease to Woolworths which draws a total net income is $1.79 million per annum.

Woolworths Wadalba, located on the NSW central coast, sold for $26.15 million on a 5.69 per cent yield to a high-net-worth Victorian investor.

The 3,905sq m centre, anchored by a Woolworths Supermarket and BWS, occupies a 1.55-hectare corner site on the Pacific Highway in Wadalba, less than 100km from the Sydney CBD.

Colliers International James Wilson and Alex James-Elliott handled the sale.

Non-discretionary retail property has become highly sought after by investors because of its limited exposure to online retailing.

According to JLL Research, neighbourhood centre investments were $1.3 billion in 2019 or 21 per cent of total retail transactions, nationally.

Across 2019, private investors and syndicates acquired 48 percent of neighbourhood centres, up from 34 percent in in 2018.

Woolworths is also selling the Spring Farm Shopping Centre near Campbelltown, about 60 kilometres south-west of Sydney and the Bakewell Shopping Centre in the inner suburbs of Palmerston North, about 25 kilometres south-east of Darwin.

The Spring Farm asset includes a Woolworths, BWS and 10 specialty shops, while the Bakewell centre includes a 4800sq m Woolworths and BWS liquor store, 12 specialty retailers and a 287-space car park.

The recent withdrawal of Kaufland from Australia, before opening its first store, will be a positive for both Woolworths and Coles moving forward.

Aldi is also looking to raise about $700 million through the sale and leaseback of a portfolio of its distribution centres across the country through JLL.