A Bunnings tipped to fetch $45m as COVID drives investor demand

Investors’ increased appetite for Bunnings investments during the coronavirus pandemic is expected to drive strong competition for an Adelaide warehouse that has hit the market for $45 million.

The Munno Para West site represents a rare opportunity to secure a Bunnings through a public sale, as private investors and institutional players target the highly sought-after investments. 

The Colliers team selling the property expect the increased demand for single-tenanted retail investments during COVID to drive strong investor interest in Bunnings Munno Para West.

The agents expect interest in the site will be in the vicinity of $45 million.

Colliers national director, retail investment services, James Wilson said the 16,936sqm warehouse is fully leased to Bunnings on a 12-year lease with further options.

“This is a prime opportunity to acquire a dominant Bunnings Warehouse secured by a long-term and attractive net lease structure, on a strategic and substantial landholding within Adelaide’s booming urban growth corridor,” Mr Wilson said.

Bunnings Munno Para West is situated in Adelaide’s booming northern growth corridor. Picture: realcommercial.com.au/for-sale

Mr Wilson said 17 freestanding Bunnings Warehouse assets have been sold across Australia in the past 18 months for more than $900 million in total, representing an average price of $47.41 million per deal.

He said the Colliers-managed sale of Bunnings Eastgardens in Sydney, acquired by property investment manager Newmark Capital for $75 million, set the benchmark investment yield nationally at 4.15%.

COVID-19 has increased the already-strong interest in Bunnings hardware investments, which are rarely marketed publicly.

Colliers director (Queensland), retail investment services, Chris Maher said the strong results for Bunnings assets during the pandemic was underpinning investor demand.

“The strong transactions recorded for freestanding Bunnings Warehouse assets and proven resilience through COVID-19 is driving continued investor demand, as buyers seek to deploy pent-up capital and take advantage of the low interest rate environment,” Mr Maher said.

Mr Maher said the pandemic had intensified the flight to quality retail assets such as single-tenanted investments with strong covenants.

“Since March 2020, with COVID-19 majorly impacting the retail markets, the demand for core, defensive assets has only intensified.

“The main investment fundamentals of a single-tenanted investment have proven to be extremely resilient and attractive throughout the tough market conditions. Established and emerging capital is targeting the security of non-discretionary income, underlying land value and strong growth locations.”

Bunnings Munno Para West is the third Bunnings to be publicly marketed in Australia this year.

The Adelaide warehouse is the third freestanding Bunnings to be publicly marketed in Australia this year. Picture: realcommercial.com.au/for-sale

A Melbourne family paid $22.2 million for a 9421sqm, newly-opened Bunnings in Queensland’s Plainland last month, in Burgess Rawson’s portfolio auction.

A 5530sqm Bunnings in the NSW town of Young sold for $11 million in May, attracting strong interest from investors typically priced out of buying a new Bunnings hardware investment.

The Young deal was also managed by Colliers, with the Munno Para West property being the fifth Bunnings that Colliers has been appointed to sell in 2021.

Bunnings Munno Para West is situated on a 4.11ha site about 38km north of the Adelaide CBD and 13km south of Gawler, the gateway to the Barossa wine region.

Colliers national director of investment services and capital markets, Alistair Mackie, said the site was strategically located within the booming northern growth corridor of Adelaide, which was forecast to benefit from significant population growth and infrastructure spending.

“Bunnings Munno Para West is truly a future-proofed investment sitting within the heart of Playford, Adelaide’s fastest- and largest-growing local council area,” Mr Mackie said.

The Munno Para West site is currently owned by the Cromwell Direct Property Fund, which is managed by real estate fund manager Cromwell Funds Management.

The 12-year lease to Bunnings, which expires in 2028, has a seven-year weighted average lease expiry and further options extending to 2064.

Expressions of interest close on 12 August.