Investor demand pushes price of Melbourne fruit shop to $9m

Retail properties are in high demand in Melbourne, and this sale comes as other shops and supermarkets are being snapped up on very tight yields by investors who see them as a good antidote to low interest rates, agents say.

Leased to Strawberry Point Fresh Food Market, the Forest Hill property includes a modern 1200-square-metre, enclosed facility and 48 open-air parking spaces.

With a flexible and valuable Commercial 1 zoning, the asset, with 55 metres of street frontage has, according to the agents “substantial future development upside”. The tenant is paying annual rent of $348,140 to occupy the premises, which the vendor bought for less than $4 million in 2012.

The asset includes 48 open-air parking spaces. Photo: Supplied

“The sale reflected a yield of 3.6 per cent, which is particularly encouraging for property owners when compared to recent freestanding supermarket transactions selling for in excess of 5 per cent,” CBRE selling agent Nic Hage said. He marketed the property with colleagues Rorey James, Sandro Peluso and Benson Zhou.  The property was also marketed by Vinci Carbone’s Frank Vinci and Joseph Carbone.

There was significant interest from Asian investors in the mix of prospective buyers, the agents said.

Whilst the sale price reflected a very tight yield, the rate paid on land was a moderate $2556 a square metre. Nonetheless it was an exceptional result give the potentially very long lease.

In the past, sub-4 per cent yields, such as that recorded for 281-285 Canterbury Road, are typically seen when ‘strip shop’ assets sell in the $1 million to $3 million range.

“However, given the current interest rate climate and the increase in the number of investors, both local and foreign, in the market, it is no surprise that yields are sitting where they are,” Mr Vinci said. “The alternative to buying property at 3.6 per cent is leaving your money in the bank at half that yield, with no tax offsets such as depreciation and also no growth in capital value.”

Elsewhere in Melbourne, an offshore investor paid $2.6 million at auction for a two-storey shop at 98 Glenferrie Road, Malvern, which had been occupied by the Renown Fruit Emporium since 1964. The deal, on a yield of 3.6 per cent, came six weeks after the neighbouring shop at 100-102 Glenferrie Road sold for $3.21 million, or $710,000 above reserve.

In South Yarra, a two-level building leased to Eyes Optometrists sold for $2.56 million or $400,000 more than its reserve. Close to the Royal Botanic Gardens and serviced by tram and train, this asset exchanged on a 3.43 per cent yield.

In the inner-eastern suburb of Collingwood, an accountancy firm outmuscled investors to buy 173 Johnston Street, which it plans to occupy.

173 Johnston Street, Collingwood, sold for $1.1 million. Photo: Supplied

Fitzroys agents Chris Kombi, Michael Ryan, James Gregson and Geoff Emmett and Dean Alexander negotiated the sale of all three retail properties.

There is also fierce competition for retail assets worth much more, too – with recent sales in excess of $10 million also selling on record-low yields.

The sale of a Woolworths supermarket in Brighton for $32 million was struck at a 3.8 per cent yield. Across town in Coburg North, a new retail asset anchored by a Coles supermarket sold for $38 million, which reflected a yield of 4.9 per cent. When this asset hit the market a few weeks earlier, it was being quoted at about $30 million.