Retail property investors in NSW are buying into the idea of “Big Australia” spending almost $200 million on malls in Orange, Coffs Harbour and Newcastle in the first five months of the year.
This investment is on top of the $420 million private offshore and local investors have spent on commercial and retail property – mainly supermarkets and malls – in regional Victoria over the past year, a 29 per cent increase on the prior year.
Figures from CBRE show non-metro NSW retail property transactions totalled just shy of $1 billion in 2017 while more than $ 1 billion worth of retail property changed hands in regional Queensland.
“We have seen investors widen their scope and pursue regional locations in search of premium returns relative to core metropolitan locations, were returns have continued to compress,” said CBRE’s NSW retail investments director Nick Willis.
“In the first half of 2018 we have seen almost $200 million in regionally located shopping centres transact, including Paul Saunders’ $22 million-plus acquisition of Summer Centre in Orange on a 7 per cent yield, Fort Street Capital’s purchase of Toormina Gardens in Coffs Harbour from Vicinity for $83.3 million on a 7 per cent yield and Stockland’s $81 million divestment of Wallsend Shopping Centre in Newcastle.
“In addition to premium returns, investors have increased confidence in these regional areas, underpinned by state government driven initiatives such as the EvoCities program [encouraging people to move to regional towns], promoting infrastructure development and subsequently population growth,” Mr Willis said.
In most cases, investors are buying malls anchored by non-discretionary retail. The Summer Centre in Orange is anchored by a Super IGA supermarket and Dan Murphy’s liquor store. “Orange is a pretty, clean and affluent country town and there is a lot of potential here,” said Mr Saunders, the architect for private equity group Blackstone’s shopping centre redevelopments.
Commenting on the flood of money being spent in regional Victoria, national director at CBRE, Mark Wizel, said regional centres like Geelong “now have all of the fundamental underpinnings to offer investors long-term capital growth and the sort of returns that they would expect from capital city markets”.
Smaller investors are also heading into regional WA with CBRE selling a 7-Eleven in Mandurah for $5.45 million on a 6.3 per cent yield as part of last week’s portfolio auction. Also at the auction a KFC & BP Service Station in Wyndham Vale in Melbourne’s west sold for $7.7 million and a healthcare property in Pascoe Vale sold for $3.58 million.
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