Record Yields for NSW Neighbourhood Shopping Centres

Sales of neighbourhood shopping centres in NSW jumped 50 per cent in 2017 as record sub-6 per cent yields spark an increase in sales activity.

More than $620 million worth of neighbourhood centres changed hands in New South Wales in 2017, with yields compressing 20 basis points over the past 12 months.

Research conducted by CBRE indicated that the increased level of activity was largely driven by corporate and institutional groups both acquiring and divesting “in a push to recalibrate their portfolios and capitalise on current conditions”.

“With changing lending conditions, the growth of online retail, coupled with current pricing, investors are placing increased focus on opportunities that provide income growth and future value add potential,” CBRE’s Nick Willis said.

[Related reading: Northcote Shopping Centre Sells with Yield of Less than 4%]

Notable transactions during the year included Parramatta’s Entrada Shopping Centre for approximately $35 million, representing a 5.6 per cent yield, and Pittwater Place in Mona Vale on a yield of 5.1 per cent.

Chester Square Shopping Centre in Sydney’s south-west last year broke the national record for the sharpest neighborhood shopping centre yield at just 3.78 per cent.

“With continued momentum from 2017 and strong weight of capital pursuing retail investments, we anticipate continued improvement, largely for metropolitan markets, which is being driven by a lack of supply and increased investment demand for assets offering these attributes.”

Headwinds are expected for the sector in 2018, although centres focused more on food and drink are viewed as somewhat recession-proof.

CBRE senior research manager Daniel Lee said that food and beverage retailers remain more defensive against online retail.

“Larger retailers fared better than smaller retailers in 2017 with 3.8 per cent and 0.7 per cent growth respectively. Retailers such as supermarkets should be more defensive against a cyclical downturn and threat of online retailing,” he said.