Retail Centre Achieves Sharpest-Ever Yield


An offshore Chinese group has snapped up The Sunbury Showrooms large format retail centre for $14.880 million, representing an initial yield of 6.52%, setting a new yield benchmark for large format retail centres in Victoria.

Local Victorian developers H.Troon exclusively appointed CBRE’s Victorian Retail Investments team to market The Sunbury Showrooms – a former Bunnings store that was converted to a large format retail centre in 2014.

Steered by Justin Dowers, Chris Parry and Kevin Tong, the Expressions of interest campaign was a hotly contested process that yielded seven formal offers.

Situated 40km north-west of the Melbourne CBD, The Sunbury Showrooms has a total lettable area of 5,554sqm. The centre incorporates 6 homemaker tenants, such as The Good Guys, Godfreys, Petstock and Repco.

“The result we have achieved for Sunbury Showrooms has set a new benchmark yield for large format centres in both Victoria and Australia, with yields previously sitting above 7%,” Mr Dowers said, adding that the limited supply of investment grade retail properties on the market was leading to further yield compression for blue chip retail assets across the board.

“With the current environment characterised by a lack of premium retail investment offerings, we are also seeing an increase in demand for assets located in outer metropolitan areas such as Sunbury, which are experiencing population growth and benefiting from government investment.”

Mr Dowers also noted that heightened confidence in the large format retail market and the associated lease covenants was helping to drive significant yield compression in this market segment.

“The sector is typified by long initial lease terms and fixed annual increases, which are very attractive to investors at the moment,” Mr Dowers said.

“Population growth in Victoria is also driving demand for these investments, with Victoria maintaining the highest growth levels in the country of 1.95% per annum, compared to the national average of 0.8%.”

Mark Wizel, National Director of CBRE’s Retail Investments team, said the Sunbury sale followed a string of retail acquisitions by offshore Chinese investors in 2016.

“Chinese direct investment in 2016 definitely saw a significant shift and we are expecting this to continue this year, with the buyer profile aiming to diversify away from purely development focused investments towards income producing assets such as retail centres,” Mr Wizel said.

Image: CBRE

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