Feb 10 2018Add to Favorites
Offshore investor interest in Western Australia’s retail market is expected to intensify in 2018, building on the $48 million worth of assets transacted in 2017.
According to CBRE Research, $458 million worth of Western Australian retail assets changed hands in 2017, up from $398 in 2016. Highlight transactions include a 50% share in Vicinity Centre’s Rockingham Centre to AMP Capital for $305 million at a yield of 5.86%.
CBRE’s Richard Cash said demand for large format centres was strong in 2017, with buyers attracted to the secure cash flow generated from long lease terms to predominantly national tenants. The underlying land value of large format centres provides for longer term development upside given many centre’s are located on key thoroughfares.
In 2017, six large format retail assets change hands for $62.90 million – averaging a per square metre rate of $2,791 and yield of 7.51%.
Neighbourhood shopping centres experienced a drop-in transaction volumes from $210 million in 2016 to $35 million in 2017, albeit this is attributed to the lack of available stock rather than weaker investment appetite.
“Neighbourhood centres remain more defensive in nature against online retail and are therefore extremely sought after in the market, particularly given a large proportion of their income is generated by major anchor tenants such as Woolworths or Coles on long term leases,” Mr Cash said.
“While supply of these assets was limited in 2017, the strengthening market and state economy will provide more confidence for shopping centre owners to test the current demand.”
CBRE’s Anthony Del Borrello said Western Australia’s retail market would continue to gain momentum in 2018, fuelled by an upturn in offshore investor interest.
“Offshore investors - mainly made up of Singaporean investors - accounted for 28% of retail purchases in Western Australia in 2017. We expect to see this flow of capital continue given the attractive yield spread, stabilisation of the Western Australian economy and Asia’s relative proximity to Perth.”
Residential developer Legacy Property is set to commence a syndicated equity raise for its 7thand final stage of Caddens Hill, with minimum investment amounts starting at $250,000, targeting 17.5% investment return over the twelve-month construction period.
MP Funds Management (MPFM) has made its first investment of 2019, a co-investment with another group that MPFM has a successful and ongoing co-investment relationship with. The acquisition of the Crossroads Homemaker Supercenter (the subject property) is an opportunity of scale and dominance in one of Australia’s most significant growth regions. The centre offers an existing net lettable area of 47,997sqm on 143,997sqm land over 4 separate lots. 93% of the property income is underpinned by national retailers including Bunnings Warehouse, Freedom, Fantastic Furniture, the Good Guys and Nick Scali.
Dexus today announced its result for the half year and reaffirmed its guidance for distribution per security growth of circa 5% for FY19. Dexus Chief Executive Officer, Darren Steinberg said: “It has been a productive six-month period where we have added value through enhancing our development pipeline and attracting new investors to our funds management business. This has all been achieved while maintaining low balance sheet gearing. “In our office portfolio we continue to outperform the MSCI office benchmark1 over one, three and five years through driving higher rents and lower incentives, particularly in Sydney which has been reflected in property valuations during the period. “In our funds management business, we now have $15 billion under management with investors and partners that can invest alongside us through the cycle, reinforcing our objective of being the wholesale partner of choice in Australian property.”
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