Large format retail gets the love with working from homeThe 21,670 sq m Bunnings warehouse at Hoppers Crossing centre in Melbourne’s is one of the network’s largest.

Large format retail gets the love with working from home

New houses, new renovations and the pursuit of home comforts while working from homehave kept the once-unloved large format retail sector chugging along.

Investment deals are being struck at record low yields and occupancy rates are at their peak.

While there are signs of slowing consumer demand across the country, Australian Bureau of Statistics data for May shows spending on household goods and furniture in Victoria rose 17.7 per cent over the past year.

Research from the Large Format Retailers Association and consulting group Deep End Services shows the large format market makes up 25 per cent of total retail sales, with Victoria accounting for $22.95 billion of a $92 billion national total and NSW a further $29 billion.

Testing the investment market is the biggest Bunnings warehouse in the country, a $100 million complex in Hoppers Crossing that is shared with an Amart furniture store.

Records show the 21,670 square metre centre on 221-231 Old Geelong Road is on a 55,000 square metre site and returns $4.28 million a year.

Burgess Rawson agent Billy Holderhead, who is handling the expressions of interest campaign, said there is plenty of interest from both institutions and private wealthy investors although rising interest rates had cooled some potential buyers.

“Many investors and REITS too — it’s their core business — are not going to stop,” Holderhead said. “The institutions will continue to move money around, though the cost of funding has jumped a lot. What else are you going to do with your money? You can invest money in cash, but it won’t return much.”

At the other end of the scale, a Rugs Galore on the retail “golden mile” at 214-218 Whitehorse Road, Blackburn, sold for $5 million, setting a new benchmark yield of 3.79 per cent.

The property sold two weeks before the campaign closed, according to Stonebridge Property Group agents Rorey James and Nic Hage.

“The price was compelling, with the result rivalling and beating the most recent freehold investment transactions along the popular street,” James said.

Early Settler sold for $12.1 million in April on a yield of 4.04 per cent. Research from agents CBRE and Colliers shows average yields running at between 5.29 per cent and 6 per cent — well down from 8.5 per cent in 2016.

It’s third time lucky for a large format site in the outer eastern suburb of Chirnside Park, which had previously been earmarked for a Masters mega-barn and then a new supermarket for German retailer Kaufland.

With both those operators out of the market, construction has gone ahead on a 12,000 square metre project by developer Troon Group and financier MaxCap.

The 266 Maroondah Highway site, acquired in May 2021 for $14 million, has been fully leased to retailers Baby Bunting, Harris Scarfe Home and Fantastic Furniture. Fast-food sellers Taco Bell, KFC and McDonald’s will join the existing Dan Murphy’s bottle shop.

Leedwell agent Chris Parry, who negotiated the leasing program with Nick Segran, said demand for space was strong “and we were able to secure 100 per cent of the spaces before completion of the construction”.

Not all the former Masters sites have stayed in the large format sector. Kennards Self Storage recently paid $35 million for a 5.4 hectare property in Roxburgh Park. It was sold off-market by the listed HMC Capital, formerly known as Home Consortium, which bought the Masters portfolio in 2016 for $725 million.

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