A pandemic-proof Bunnings warehouse hits the market

A highly sought-after Bunnings warehouse is up for sale as the pandemic boosts demand for the long-time investor favourite.

Bunnings Warehouse Epsom, located in the regional Victorian city of Bendigo, is only the second Bunnings to be offered for public sale this year.

Selling agents Stonebridge Property Group and Killen Thomas expect the property will attract strong interest from investors nationally looking to get their hands on a highly sought-after Bunnings covenant.

Bunnings Warehouse Epsom in the regional Victorian city of Bendigo is expected to attract interest from investors nationally. Picture: realcommercial.com.au/for-sale

Stonebridge partner Justin Dowers said Bunnings Epsom is set to test the hardware investment market for a long-time investor favourite based on recession-proof and non-discretionary spending tenancy profiles and long leases to blue chip tenants.

“We are continuing to see yields for these types of investments sharpen disproportionately to other asset sectors because of the exclusivity of the tenant and the quality of the lease, which is net in nature and provides fixed annual rental increases,” Mr Dowers said.

“The market for Bunnings Warehouse investments has further improved over the last 12 months given how well they have performed in and out of lockdown restrictions.”

Assets leased to Bunnings and other pandemic-proof essential and non-discretionary retailers have become even more highly prized by investors since the onset of COVID-19, with large format retail among the strongest performers.

Private buyers, syndicates and institutional investors have been increasingly targeting Bunnings assets, attracted to the blue chip covenant, long lease terms and annual rental review mechanism.

The increased demand for Bunnings assets during the pandemic has been reflected in pricing, driving sharp yields. The last two sales have delivered record yields of 4%.

Property investment group Charter Hall paid $65.3 million for Bunnings Nowra, situated on a 29,350sqm site on the NSW South Coast, in February. The off-market sale, negotiated by JLL, took the number of Bunnings warehouses across the Charter Hall group to 66.

The Nowra sale matched the 4% national benchmark yield for a Bunnings set in November with New Zealand investor Cook Property’s $58.6 million purchase of a warehouse under construction in Queensland’s Hervey Bay. That deal was handled by Savills and Stonebridge.

Bunnings Epsom is located on a 27,010sqm, commercial 2-zoned site on the Midland Highway, 5km north of the Bendigo CBD.

The freestanding 11,606sqm hardware store was built in 2015 with a 12-year net lease that runs to 2027, plus options to 2052, and has fixed 3% annual rental increases and an estimated net operating income of $1.6 million per annum.

The freestanding Bunnings Epsom store was built in 2015 and has a long lease to the hardware retailer. Picture: realcommercial.com.au/for-sale

The property is being marketed by Mr Dowers, Stonebridge partner Kevin Tong and Killen Thomas managing director David Marks.

The agents highlighted Bunnings Epsom’s location in the booming City of Greater Bendigo, which they said is experiencing rapid population growth and significant infrastructure investment.

“The growth in Bendigo is as strong, if not stronger, than most metropolitan cities,” Mr Tong said.

“Dwelling approvals, infrastructure investment and tourism help drive the City of Bendigo to being the third largest city in Victoria.”

Mr Tong said prospective buyers would also benefit from the state government’s 50% reduction in stamp duty for commercial properties in regional Victoria.

Investor demand for Bunnings assets has increased during the pandemic. Picture: realcommercial.com.au/for-sale

Bunnings Epsom is only the second Bunnings to be marketed publicly this year.

Expressions of interest for Bunnings Swan Hill, which sits on a 16,638sqm site in the regional city, have closed. Selling agents Savills said Bunnings Swan Hill was the first Victorian Bunnings to be brought to market in three years.

Only a handful of the freestanding Bunnings that changed hands in 2021 were offered through a public sale.