Demand for neighbourhood shopping assets grows

Investors continue to value neighbourhood shopping assets after a portfolio of 16 suburban retail assets located in 10 different Melbourne areas sold for a combined $29.14 million on an average net yield of 2.99% .

The portfolio sale of the assets accrued over many years by the late businessman Harry Oviss, shows the strength of commercial property amid rising interest rates and economic uncertainty according to Fitzroys’ Mark Talbot who conducted the sale along with Tom Fisher and Chris Kombi.

“Interest rate rises clearly haven’t perturbed the market, despite negative press,” Mr Talbot said.

“Property continues to be in good demand, and we saw this in the global financial crisis also. Investors clearly consider well-located Melbourne retail properties with quality leases a secure investment amid sharemarket and residential market volatility.”

Three properties in Alfreida St, St Albans sold for a combined $7.28 million with each offering their new owners five by five year leases to long-term tenants. Quang Vinh restaurant which has operated from the same shop for 14 years, sold for $2.51 million on a yield of 1.99%; Xuan Xinh sold for $2.42million on a yield of 2.56%; while Pho Kilm Long sold for $2.35 million on a yield of 2.63%.

This retail asset leased to a gift and tobacco store in Hampton St, Hampton was one of three properties sold on a yield below 3%; while this corner retail asset comprising three shops in Carneige was one of four properties sold for yield under 4%.

The tight yields achieved for some properties reflect that they are high-quality assets offering steady returns with future development potential, Mr Talbot said.

“Much of the interest came from buyers who knew their local area well. Investors, value-add players, land bankers and developers all showed interest. Many of the properties
offered long-term leases in place to proven tenants while also enjoying the benefit of future value-add potential,” Mr Talbot said.

The results also highlight that despite six lockdowns, the shift to working from home for more Melburnians has meant more shop locally more often, according to Mr Kombi.

“The market has acknowledged the resilience shown by Melbourne’s shopping strips over the past two years. The Covid period has reinforced their role as a place for Melburnians to connect with their local communities. Our ‘local village’ became something more than a place to run errands and do the shopping,” he said.

All of the portfolio’s 16 properties sold at auction including retail assets in Swan Street, Richmond; High Street, Cranbourne; and Ranelagh Drive, Mount Eliza.