Big malls on the block as landlords ride the retail resurgence
Large shopping centres are emerging as the surprise packet of the commercial property sales season with more than $3bn worth of the county’s largest centres now on the block.
The big sellers are not only the fund managers who have held on during the crisis but also some of the country‘s wealthiest developers who are hoping to capture the retail upswing.
The last two years have seen dramatic write downs on the value of large shopping centres as malls were deserted as the pandemic struck. Now those that took big valuation hits look attractive to buyers.
This has thrown up opportunities for buyers who had been flocking to warehouses on back of the e-commerce boom. Industrial sites are now considered expensive and even in shopping centres where tenants have been slugged by the crisis there is hope.
Some of the centres that are now up for grabs all but dodged the crisis with assets in Queensland and Canberra not seeing the steep drop offs that hit city assets in Sydney and Melbourne.
In Queensland, the Homeworld Helensvale complex on the Gold Coast is hitting the block for more than $350m in one of the largest offerings in the hot large-format sector. The asset, being sold by the Les Ansley family, can be expanded with a residential component.
This is expected to also tempt the mixed use developers to the property that is being sold via Colliers and Stonebridge.
Queensland state fund manager QIC is also putting the Logan Hyperdome in Brisbane on the market with hopes of cracking the $700m mark. The centre in Brisbane’s south, being handled by CBRE, is one of the largest single-level centres in the country. It will also be sought by developers also keen to back an expansion.
QIC is selling partly as it pours capital into mixed use projects at other centres, where it is already adding hotels and offices.
QIC Real Estate managing director Michael O’Brien says the structural shift towards flexible working was a “significant opportunity”. He cites the greater interest in the suburban offices and the co-working spaces which it is putting in its retail town centres.
Adding to the mix are a series of private players looking to capitalise on the upswing from strong employment growth and consumer confidence, backed by a stimulatory budget and still low interest rates.
The ACT-based Vinta is selling its strongly-performing Marketplace Gungahlin shopping centre in Canberra with a price tag of more than $400m, via CBRE.
The agency said a record $12.7bn in retail assets were transacted last year and that momentum has continued into this year, with the comparative return profile for retail investments drawing in investors.
The market has adjusted to the lower income some major centres are generating in the wake of the pandemic. But even city malls are expected to be back to pre-pandemic levels by 2024.
Buyers are getting in ahead of an upswing. Hong Kong’s Link REIT last year snapped up a $538.2m stake in the Queen Victoria Building, The Strand Arcade and The Galeries in Sydney.
Those city malls are co-owned by Vicinity Centre and chief operating officer Peter Huddle remains bullish about long term prospects of large properties.
“The advantage we all have is essentially the value of our assets,” he said. “The land is already baked into the valuations.”
Mr Huddle said that retail is at the core of Vicinity’s developments and it has already masterplanned 20 of its 60 assets. Plans include offices, hotels and apartments around centres.
“With the economic value already built in we should have an advantage … anywhere from a 10 to 40 per cent advantage over a private developer coming in,” he said.
The return of big buyers has prompted other big players to put up assets. Sellers include funds run by Vicinity and Dexus, as well as superannuation fund CSC.
Assets in the market include two separate stakes in the $1.2bn Indooroopilly Shopping Centre in Brisbane, and a Vicinity-run fund selling Perth’s Midland Gate shopping centre, which is also up for grabs for about $500m.
Despite the shrinking of traditional anchors like department stores, the new uses of malls, which include medical centres, offices, hotels and apartments, shows their new lives could just be beginning.
QIC’s Mr O’Brien agrees the competitive advantage of the biggest centres lies in their land. “As [large] shopping centre managers, with strategic land parcels and favourable planning overlays, we can offer bespoke-build and co-design opportunities to development partners looking to move into fast-growing suburbs,” he said.
He said that regional shopping centres also remain the most sustainable distribution channel for retailers wanting to draw in online customers alongside shoppers who sought out physical stores.