Private investor buys pandemic-proof suburban Woolworths for $35 million

A Woolworths supermarket in suburban Melbourne has sold for $35 million as investors target pandemic-proof essential retailers.

Woolworths Eltham sold on a sharp 3.3% yield after the first major supermarket sales campaign in Victoria for 2022, the selling agents at Stonebridge Property Group and Fitzroys said.

A Melbourne-based private investor bought the 3744sqm freestanding supermarket from a family that owned the asset for more than 20 years.

“The result of Woolworths Eltham at a 3.3% yield is the sale the market needed to reaffirm the underlying demand for this type of investment product,” Stonebridge partner Justin Dowers said.

“Given that we had 15 offers on the property and achieved a yield at this level would indicate that although buyers may be anticipating a higher interest rate environment, there is greater concern of holding cash when entering a higher inflationary period.”

Retail investors are increasingly targeting assets tenanted by essential and non-discretionary retailers, given the strong performance of the likes of Coles, Woolworths and Bunnings during the pandemic.

Stonebridge and Fitzroys noted a growing pool of buyers are looking for defensive, income-producing investments that have proven to be pandemic proof.

“Eltham Woolworths was a high-performing supermarket and it was proven that supermarket investments, especially those which trade above their percentage rent threshold, are one of the best investment products to provide a hedge against inflation,” Fitzroys director David Bourke said.

Freestanding supermarkets like Woolworths Eltham are highly prized by investors. Picture: realcommercial.com.au/for-sale

Fitzroys agent Shawn Luo said standalone supermarkets are among the most prized assets in the market.

“In the current environment freestanding supermarkets are seen as one of the most secure opportunities, especially those with underlying landholdings,” Mr Luo said.

Woolworths Eltham sits on a large, 9044sqm site in the centre of the suburb. The recently refurbished full-line supermarket is leased to Woolworths on a new five-year lease plus options.

There is a growing investor appetite for pandemic-proof essential retailers. Picture: realcommercial.com.au/for-sale

Stonebridge Asia Practice partner Kevin Tong said 30% of the bids received for Woolworths Eltham were from investors with Asian heritage.

“Although they were not the eventual purchaser, it further highlighted the demand from the Asian investor buying pool for supermarket investments in Australia,” Mr Tong said.

Stonebridge’s sales campaign for another freestanding Melbourne suburban supermarket, Coles Lalor, has closed. Stonebridge is also selling the smaller format Woolworths Metro in Hawthorn.