Investors shopping for small neighbourhood malls

Investors hit the stores in Victoria last year, snapping up nine neighbourhood shopping centres for a combined value of close to $200 million.

That compares with similar shopping centre sales of $60 million in 2012 and sets the scene for what experts said could be a strong year for the sector.

CBRE’s Victorian Retail Investments Director Mark Wizel says the sale of the Mornington Village Shopping Centre in late December, for a yield of 7.47%, set the benchmark for the retail investment market in 2014.

A private Victorian investor paid $25.8 million for Mornington Village after what Wizel says was a highly competitive public campaign with 15 genuine offers made.

“2013 was certainly the strongest year we have witnessed since 2007, with both private and institutional investors directing more money than ever towards the non-discretionary, Victorian retail investment market,” he says.

“This level of demand is now being further amplified through the addition of Asian buyers entering into the shopping centre market.”

Wizel says there are not many small shopping centres on the market, and a lack of supply is pushing up prices.

Source: CBRE

“While the demand for these shopping centres has never been greater, the on-going lack of opportunities that are being offered to the market is placing significant upward pressure on the prices investors are prepared to pay to secure these assets,” he says.

CBRE Associate Director Justin Dowers says low interest rates are bringing buyers back into the market and should ensure demand remains strong for small shopping centres.

“However, it is the consistent performance of the major supermarkets along with the perceived stability in non-discretionary specialty shops, that is directing a lot of this interest towards retail investment property, and more particularly, neighbourhood shopping centres,” he says.

CBRE says the Mountain High Shopping Centre in Bayswater is the only Victorian centre known to be coming to the market early this year.

But at the other end of the scale, Melbourne’s historic The Block Arcade is up for sale and expected to fetch more than $100 million.