Investors have snapped up $6.5 billion worth of retail assets in the past year, led by big-ticket mall sales across Victoria and NSW.
For the three months ending September, sales totalled $2.4 billion, a 45 per cent increase quarter on quarter, according to retail analysts at Cushman & Wakefield.
The City of Sydney has spent $45 million revamping the Oxford Street shopping strip. Photo: Jessica Hromas
The deals were made despite weakness in consumer demand and a concern among industry heavyweights, such as Harvey Norman’s head Gerry Harvey, as to the impact online giant Amazon will have when it launches its Australian operations.
This has also hit the listed retail real estate investment trusts’ security prices in recent months.
These sales volumes were boosted by the GPT Wholesale Shopping Centre Fund acquiring a 25 per cent stake in Highpoint Shopping Centre in Melbourne for $680 million at an initial yield of 4.2 per cent.
Charter Hall’s Long WALE Hardware Partnership’s acquisition of a portfolio of six former Masters retail stores, subject to new 12-year leases to Bunnings, for a total purchase price of $187 million, will also boost the retail sector’s investment turnover.
According to Dr Dominic Brown, Cushman & Wakefield’s head of research for Australia and New Zealand, in the third quarter of this year, the retail investment market witnessed an increase in institutional purchasing activity compared to the first half of the year, accounting for $2 billion, or 86 per cent of the national total.
Dr Brown said, of this group of investors, unlisted funds were the strongest net purchasers at $794 million.
Outside of the Highpoint sale, Queensland proved most attractive to unlisted funds, with $242 million invested across six transactions, including three neighbourhood centres.
On the opposite side of the ledger, private investors were the largest sellers, divesting $1 billion of assets in net terms, much of which occurred in Victoria.
“Retail investment assets are expected to remain in high demand given their strong relative value proposition. With several high quality assets for sale, this should support deal activity over the remainder of the year,” Dr Brown said.
“However, for the annual investment volume to match the 2016 result, about $2 billion needs to be invested in the current fourth quarter. This would represent an increase of 47 per cent on the fourth quarter, 2016 result.”
Oxford Street strip
Amid the sales, there is also increasing demand coming back into the suburban shopping strips.
According to retailers, there is a rejuvenation of Sydney’s Oxford Street under way, with two independent businesses signing long-term leases on City of Sydney-owned properties.
Throwback will move from their current Oxford Street premises to a bigger home at 70 Oxford Street, where they will stock Australia’s largest range of NBA jerseys and merchandise.
Independent Australian-owned supermarket QE Food Stores will open their eighth store at 64 Oxford Street, selling organic food, produce and ready-to-eat meals.
Lord Mayor Clover Moore welcomed the investment on Oxford Street, which will increase with additional long-term leases in the coming months.
“Oxford Street has been home to an eclectic mix of unique and independent operators for decades and these two businesses will build on its reputation as one of Sydney’s best retail centres,” the Lord Mayor said.
“We’ve been working hard to rejuvenate Oxford Street. Earlier this year, we resolved to look for a long-term lease partner for a number of Oxford Street properties with a combined lettable area of more than 12,000 square metres. This came following two unsolicited proposals in 2016.
“We’ve spent more than $45 million on public domain upgrades and capital works projects since 2011 and allocated more than $500,000 worth of business grants to Oxford Street retailers.
“We’ve made great strides with our Oxford Street creative spaces program, where 22 cultural and creative businesses pay low rent to use our properties. A key objective of this report is to integrate these cultural spaces into a future redevelopment.
Ms Moore said the City’s property team is close to securing new tenants for a number of additional properties along Oxford Street.