Retail investors in $10 billion buying frenzy

Blackstone has bought Victoria’s Forest Hill Chase Shopping Centre.

Retail investors spent almost $10 billion acquiring new assets during the last financial year – eclipsing the five-year average by almost $3 billion.

With major shopping centres high on the wish lists of both local and foreign investors, transaction values soared 40% above the long-term average to $9.76 billion, according to Savills research.

Big boxes: ‘Category killer’ stores tighten grip on retail market

Melbourne led the way, with its $2.77 billion worth of sales a $900 million improvement on the five-year average, spurred by major deals including Blackstone’s acquisition of Vicinity Centres’ Forest Hill Chase and Brimbank shopping centres as part of an $841.4 million portfolio.

Sydney proved similarly popular with investors with $2.9 billion worth of retail property changing hands, up more than $500 million on the last financial year.

Brisbane also recorded major gains, selling $2.71 billion – an almost $500 million jump on 2014/15 – with sales like Toombul Shopping Centre, which transacted as part of a Vicinity Centres portfolio, and a $55 million deal for DFO Brisbane boosting the bottom line.

Perth also bounced back from a slow year, trading $752 million worth of retail assets, up from $403 million.

Only Adelaide dipped from its 2014/15 financial year results, with its $635 million in deals a $130 million drop, despite Blackstone’s CBD purchases of Vicinity Centres’ Rundle Place and 80 Grenfell St in December for $400 million.

Savills national head of research Tony Crabb says the retail results, which trumped 2014/15 by almost $2 billion, surpassed expectations in what is already a hot market.

Maitland Hunter Mall is expected to sell in the coming weeks.

Maitland Hunter Mall is expected to sell in the coming weeks.

“This has been a massive result, even given the tremendous investment market we have experienced over the last few years,’’ he says.

Agents are now bracing for another bumper financial year, with a slew of shopping centres already on the market and due to sell soon, headlined by a six-property Vicinity Centres portfolio comprising Maitland Hunter Mall, Hilton Plaza, Monier Village, Tweed Mall, Wodonga Plaza, and Albany Brooks Garden, which are due to sell for upwards of $200 million in the coming weeks.

We are going to see intense competition for any asset that comes to market and that will see falling yields continue to break records

Savills national director of retail investments Steven Lerche says the sales boom is being stoked by investors who have been forced to wait for their opportunity.

“The figures are huge and reflect significant pent-up demand driven by retail property’s safe haven status amid continued global economic turmoil. Global cash has and will continue to find Australia a transparent market where it’s easy to do business,” Lerche says.

But Lerche says the flurry of sales means a stock shortfall could soon be on the cards, with prices to skyrocket as a result.

Australian retail buyers. Source: Savills Research

Australian retail buyers. Source: Savills Research

“Over the next six months we will see a continuation of the strong demand but prospective purchasers are likely to find a severe shortage of stock, with owners reluctant to part with their prized investments. Where will they put their money if they sell?” he says.

“As a result we are going to see intense competition for any asset that comes to market and that will see falling yields continue to break records.”

Foreign investors had a hand the largest slice of retail property sales in the year to June 2016, with 27% of buyers originating overseas.

Local private investors made up 24.7% of the deals, while trusts (18.3%), funds (12.4%), developers (9%) and syndicates (5%) also figured prominently.