New Bunnings warehouse hits the market as COVID investors circle
A Bunnings that’s about to open its doors has hit the market amid hot buyer demand for the popular investments, in a rare opportunity to buy one of the warehouses for less than $25 million.
The new Bunnings in Plainland in Queensland’s Lockyer Valley is expected to fetch about $19 million when it headlines a $150 million Burgess Rawson portfolio auction on 23 June.
It is the only the second freestanding Bunnings to be publicly marketed in Australia this year and follows the $11 million sale of a Bunnings in the NSW town of Young in May.
Burgess Rawson Melbourne director Billy Holderhead said there was already significant interest in the Plainland warehouse as Bunnings investments were rarely offered for sale publicly.
“Since January last year, 15 freestanding Bunnings investments have sold worth $766 million, at an average price of $51 million, but only two of those were marketed publicly,” Mr Holderhead said.
Mr Holderhead said there were also limited opportunities to buy a Bunnings for less than $25 million.
“So to offer a newly-constructed property with a brand-new lease for circa $19 million is exceptional,” he said.
“This is a great opportunity to secure a property with arguably the best tenant in the retail freehold investment market.”
Growth corridor Bunnings buys ‘hard to come by’
Mr Holderhead expected Bunnings Plainland would be particularly attractive to investors because of its price, its location in a booming growth corridor and position on a prominent site on the major road between Brisbane and Toowoomba.
It had a unique direct connection with a Warrego Highway on-ramp, he added.
The 9339sqm store, on a 2.17-hectare site 60km west of the Brisbane CBD, is expected to open in June.
There is a 10-year lease with the Wesfarmers-owned Bunnings, plus options, with a net rent of $935,000 per annum.
Mr Holderhead said Bunnings freehold investments below $25 million in metropolitan areas and growth corridors were very hard to come by.
He said the last comparable sale for a publicly-marketed Bunnings in a metro or growth corridor with a typical Bunnings lease was in Clyde North, in Melbourne’s outer south-eastern suburbs, in November 2019. It sold for $42.3 million.
He said the most recent metro or growth corridor Bunnings sale in the sub-$25 million price bracket was a small-format store in Lawnton, north of Brisbane, at a Burgess Rawson portfolio auction in August 2019.
Bunnings Lawnton sold for $18.68 million on a yield of 4.68%, which Mr Holderhead noted remained a record low yield for a Queensland freestanding Bunnings sale.
The 6784sqm Lawnton store was originally a Howard Smith/BBC Hardware facility that was rebuilt and redeveloped by De Luca Corporation. De Luca also acquired the Plainland site, developing and constructing the new warehouse.
Mr Holderhead said Bunnings Plainland represented a different investment to the 5530sqm, smaller-format warehouse in the regional commercial hub of Young and a 12,800sqm, publicly-marketed Bunnings – originally a Masters store – at Robina on the Gold Coast that sold for $28.05 million in December 2020.
He said the Plainland warehouse was a more conventional Bunnings Warehouse property in a growth corridor location, which would be more attractive for most investors in this market as they wanted an asset that looked like their local suburban Bunnings.
“A lot of the people who will bid on this are based in Melbourne and Sydney and will probably bid on it and buy it sight unseen,” he said.
COVID drives investor interest in Bunnings
There has been significant investor demand for Bunnings and large format retail given the sector’s strong performance during the coronavirus pandemic, with the housing boom further adding to demand for furniture, electrical goods and hardware.
Private investors, syndicates and institutional investors have been targeting Bunnings assets.
“A lot of people who have been really keen to get their hands on one of these, especially in the COVID market, but very little has been made available to them,” Mr Holderhead said.
Many private investors were targeting properties with single tenants and freestanding titles, particularly the likes of Woolworths, Coles and Wesfarmers businesses, such as Bunnings and Officeworks, he explained.
“There has been a separation from Woolies, Coles and Bunnings and then the rest as far as desirability is concerned, especially for freestanding properties, without secondary tenants.”
Bunnings Young, located 375km south-west of Sydney and 160km north-west of Canberra, attracted strong interest from local and interstate investors.
Colliers national director of retail investment services James Wilson said its lower price point allowed increased buyer competition from private investors who were typically priced out of buying a new Bunnings hardware investment.
Bunnings Plainland is expected to be the most expensive commercial property offered in Burgess Rawson’s biggest portfolio auction, in Melbourne on 23 June. The 31 properties total $150 million and cover essential services sectors, including childcare, fuel, fast food, government, supermarkets and shopping centres.