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.