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Market Insights

05.02.2019

Niddrie SC listed amidst shift to land rich assets

A Melbourne investor has listed the Niddrie Central Shopping Centre as developers and investors, including a particularly strong Asian cohort, drive a market shift towards income producing assets with development upside in the wake of a troubled residential apartment market.

CBRE National Director Retail Investments, Mark Wizel, who is managing the sale with Justin Dowers, said the land rich, 5112 square metre, Niddrie neighborhood centre, which is being offered for the first time, is anchored by a 3543 square metre Woolworths supermarket on close to 10,000 square metres of under-utilized Commercial 1 zoned land with a net annual income of $1.46 million.

“This is just what investor/developers are looking for – a strongly performing supermarket anchored centre in Melbourne‘s middle suburbs – only 11 kilometres from the Melbourne CBD – that is going to provide a solid income stream on top of significant future development potential in an area with increasing demand for medium density residential accommodation.

“The vendor has taken a well-considered punt on putting this property to market at a time when such properties are de rigueur and at a time when quality investments are in short supply across all commercial sectors,’’ Mr Wizel said.

According to CBRE Negotiator Ashley McIntyre, over the last 10 months 25 such properties have sold for more than $500 million, based on future add-value potential and current income streams, and in the process breaking yield and land rate records as apartment development issues trigger increasing interest in alternative assets.

Ms McIntyre said off-shore bidders had equaled or exceeded the number of local bidders on more than half of the properties sold. In the latest deal, that of a majority Savers-leased property in Greensborough, a local developer paid $10.9 million after the Expressions of Interest campaign attracted 13 bids – six domestic and seven international – with the immediate under bidder being an off-shore Asian investor.

Mr Wizel said enquiry for well-located, income producing properties with the potential to add value down the track, had snowballed over recent months as it became clearer the extent of the apartment market malaise.

“We are taking an increasing number of calls from investors and developers, local and off-shore, for any opportunities we can identify. I have no doubt that share market volatility is also playing a part in what has been a massive increase in enquiry,’’ Mr Wizel said.

He said some investors, including local Chinese families and high net-worths, were onto the change early but others had been sitting on their hands waiting for some form of confirmation that the apartment market wasn’t going to show as quick a recovery as they would like.

“And so the question has been what to do with the money that would have flowed into new apartment buildings. The answer has been a resounding yes to assets which provide both an income stream and the likelihood that the favorably zoned land will offer up the potential to maximize site usage in the longer term.

“In a way it’s an essential plan B whilst they prepare for the next apartment development cycle, but it is also an indication of the maturity of the off-shore investment /development market,’’ Mr Wizel said.

He said a more conservative planning agenda, a major decline of buyer activity due to the credit squeeze, a reduction in mainland Chinese buyers for off-the-plan apartments due to government cash outflow constraints, the Victorian Government’s abolition of stamp duty savings for investors, and moves to claim extra duty from overseas buyers, had all contributed to the asset switch.

Mr Dowers said retail properties, particularly supermarkets and supermarket anchored shopping centres that had the potential to deliver mixed-use developments, were high on the list of preferred acquisitions.

“These properties offer non-discretionary spend defensive investments, usually with long leases to blue chip tenants, as well as the significant future development upside that town centre zoned land allows for in rapidly growing suburbs.

“Such developments would also dovetail nicely with the need for metropolitan councils to make the most of scarce town centre sites by facilitating mixed-use developments which fully utilize a site’s capacity to serve the needs of the community.

“These factors remain some of the most compelling attributes of property investment across all sectors of the commercial property market,’’ Mr Dowers said.

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