Buyers unable to afford Coles and Woolworths tenanted properties are instead turning to traditionally less-favoured independent grocers in a sign of the increasing premium being placed on the asset class.
CBRE is citing the recent $4,488,888 sale of a strata titled property in Hoppers Crossing leased to IGA as evidence of the trend, with sales agent Joseph Du Rieu explaining that the market is viewing IGA tenanted supermarkets, which are often in strata-titled complexes, as an entry level investment into the retail sector.
“Historically, focus has been on Coles and Woolworths leased supermarkets, however given the tightly held nature of these properties, we are seeing a heightened level of demand for supermarket investments leased to independent grocers,” Mr Du Rieu said.
“We are continuing to see unrivalled levels of demand from buyers seeking to secure supermarket investments with many buyers priced out of the market for Woolworths and Coles leased assets, which is underpinning increased demand for IGA tenanted supermarkets.”
The 750-square-metre store, set in a complex of five, was sold with nine years remaining on the 15-year lease,and is currently returning a net income of $238,000 per annum with a yield of 5.3 per cent.
Joint listing agent Justin Dowers explained that the result was particularly impressive considering the historical investor stigma against strata titled properties.
“We were extremely pleased with the response from the buyer market, where historically properties of this nature with ‘strata titles’ are considered less appealing than true freestanding supermarkets,” Mr Dowers said.
“Achieving an initial yield of 5.3 per cent for an asset of this ilk is a testament to how the property was positioned in the market as the best retail investment offering sub $5 million.”
He attributed the increasing demand for assets like IGA Supermarkets to investors’ confidence in Victoria’s projected population growth figures.
“Victorian retail investments properties are seen as more favourable compared to other states, noting the current and forecasted population growth which is consistently ranking the highest within the country,” Mr Dowers said.
“Whilst areas like Wyndham are showing massive growth, this is also being experienced in other areas of Melbourne, and also prominent regional hubs, which is driving retail performance all over the state.”
CBRE recently sold another IGA in Wantirna South on a yield of 5.5 per cent.
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