Victorian convenience retail continues to lead the charge

​Melbourne, 1 October 2014 – The Mountain High Shopping Centre, 35km east of the Melbourne CBD, has been sold to a private Sydney-based family.

The off market sale was transacted by CBRE Victorian Retail Investment Directors Mark Wizel and Justin Dowers at a low passing yield of 7.31%. It boosts to over $750m the value of sub $100m non-discretionary retail assets that have been sold in Victoria in the past 18 months.

“Increased interest from domestic institutions and enhanced competition from a revitalised private investor market is driving values in the non-discretionary retail sector to levels not seen since 2005-2007,” Mr Dowers said.

“The sale of the Mountain High Shopping Centre is a strong reflection of the pent up demand from investors wanting to secure good quality neighbourhood shopping centres in Victoria. There is no doubt that the market is moving in favour of vendors, with both private and institutional buyers attracted by the security and liquidity of this asset class, supported by the affordable cost of debt funding.”

However, in an interesting trend, Mr Wizel noted that many current centre owners were using the current low interest rate environment as an opportunity to re-finance existing assets for the medium term.

“We are noticing a strong trend towards re-financing at present within this part of the market, that is effectively having an impact on the supply of investment product in Victoria,” Mr Wizel said, citing the recent decision to Lend Lease to re-finance its LLRP portfolio of six sub regional centres as one example.

Limited investment opportunities and strong buyer competition are two of the key factors helping to drive down yields in the sector according to CBRE Retail Research analyst Philippa Bordonaro.

“Improved conditions for tenants, availability of funds for new small businesses and the continued strong performance of Coles, Woolworths and Aldi are all factors in why buyer confidence is stronger than we have seen for almost two decades,” Ms Bordonaro said 

Mr Wizel added; “Well performing retail properties are so difficult to acquire, they are short in supply and long in demand and therefore it does not surprise our business nationally to see the strong prices that are being achieved for retail assets when they are offered to the market.”

The Mountain High Shopping Centre has a gross lettable area of 7,674sqm and is anchored by a Coles supermarket on a new 20 year net lease, supported by 30 retail tenancies.

The sale continues a strong run of activity in the neighbourhood shopping centre sector in Victoria, with Mr Wizel noting that another $380m in retail centres are currently in the final stages of due diligence, involving both private and institutional buyers.