Victoria’s retail investment market continues to gain momentum, with CBRE handling more than $700 million worth of property transactions in 2015, and a spate of deals in the pipeline already helping shape a strong start to 2016.
A tranche of transactions towards the end of 2015 helped cap one of the best years on record for Melbourne’s freestanding retail investment market, with $132 million in assets changing hands over the period of August to December 2015.
In evidence of the trend, CBRE’s Retail Investment team, comprising Mark Wizel, Justin Dowers, Rorey James and Joseph Du Rieu, recently negotiated the sale of Chemist Warehouse in Cranbourne North to a Victorian based investment group for $3.4 million, reflecting a yield of 4.9%.
The next property to test the market will be the upcoming auction of Mitre 10 in Sorrento on March 5.
Located in the heart of Sorrento, on Ocean Beach Road, the 2,601sqm landholding is anticipated to receive strong interest from both investors and developers looking to utilise the site’s full potential by 2020, when the existing lease expires.
Mr James said a shift in investment sentiment had underpinned a surge in sales activity over the past three months.
“In the latter half of 2015 and the start of 2016, what has been evident is the flight to quality from investors, who are happy to pay sharper yields to secure single tenanted, freestanding retail investments,” Mr James said.
“The sale of Chemist Warehouse, Cranbourne North reflected a tight passing yield of 4.9% - a sign of the current buyer markets’ relentless appetite to secure these sought after investments. Furthermore, this appetite is reinforced by the low interest rate environment, with it encouraging buyers to pay some of the sharpest yields seen in over a decade.”
Mr Du Rieu said the strong result follows a flurry of record retail investment transactions across Victoria, including the Seaford IGA Supermarket for $4.55 million and Harvey Norman Bendigo for $9.375 million.
“Off the back of what was one of the strongest years for Melbourne’s commercial property market, offshore, interstate and local investors are seeking out opportunities to gain a footprint in this ever strengthening market, which offers some of the best fundamentals in the country,” Mr Du Rieu explained.
“As the market strengthens and stabilises, investors are increasingly looking out of the city core for opportunities, with retail investments across the metropolitan area, being one area experiencing significant growth.”
Other transactions recently completed include the 7-Eleven in Alphington for $5.5 million, Hungry Jacks in Mill Park for $6.2 million and the McDonald’s in North Geelong for $3.05 million.
Mr Dowers said auctions had also emerged a key transaction tool more widely used in the market.
“With a deeper pool of local and offshore investors than ever for freestanding retail investments, auctions are able to encourage bidding and drive competitive tension, which together with being the preference for an offshore buyer, has been a consistent method of sale for breaking new records in this market,” Mr Dowers added.