Market Insights

26.09.2019

Two Woolies, one Aldi store in premium auction

Two Woolworths and one Aldi supermarket are among five premium properties to be put to auction at CBRE’s final Premium Property Portfolio event for the year next month.

The properties, which also include a brand new 7-Eleven store at Armstrong Creek, and a new KFC store at Bundaberg East, will be sold with lease terms of seven to 20 years and income ranging from $182,500 to $761,000 per annum net.

CBRE Director Investments, Mark Wizel who is managing the auction process with Joseph Du Rieu and Justin Dowers, said the five properties represented the best that have been put to market in the PPPA series this year.

“Supermarkets are without doubt the most sought after sub $30 million investment category in the market today and the compelling list of investment credentials make it very clear why that is the case.

“First of all they offer 100 per cent non-discretionary spend tenants, the tenants are national and international blue chip companies, the lease terms are invariably long-term, and they are predominantly located in town centres with enormous value add/development potential down the track.

“These are the sort of attributes that investors have at the top of their list, especially  in what you might call challenging economic times and in view of their reputation as a true defensive investment,’’ Mr Wizel said.

Mr Wizel said what made the opportunity to buy the five properties even more compelling was the fact that owners were generally holding tight to their food & beverage sector assets.

“There is currently a high level of pent-up buyer demand for premium properties of this nature and that is due largely to the fact that owners have been reluctant to sell while there is a dearth of attractive options for reinvestment.

“In the first nine months of 2019, for example, we have seen only two standalone supermarkets sold in Victoria, whereas in the same period in 2018 there were seven sales.

“The pent-up demand has also been swelled by the availability of record low investment borrowing rates along with the lack of opportunities over the first half of 2019,’’ Mr Wizel said. 

Recent standalone supermarket sales: 

Mr Du Rieu said he expected a strong response from local and interstate investors while the properties were also likely to attract off-shore interest due to the lower value of the Australian dollar.

“Off-shore investors have shown a greater degree of interest in retail assets of late and the fact that the Australian dollar is now at a point which provides those off-shore investors, or those sourcing their funds from off-shore, with an effective discount provides an additional level of incentive.

“Quality assets are never in abundance and especially at the moment as recent sales history indicates,’’ Mr Du Rieu said.

He said the small format Abbotsford Woolworths – developed as part of the new PACE of Abbotsford Project – provided a very affordable opportunity for a Woolworths asset.

“The Abbotsford investment is a unique opportunity as the investor market typically needs to spend north of $10 million to secure a property with Woolworths as the tenant,’’ Mr Du Rieu said. 

The auction will be held at Zagame Automotive, Swan Street Richmond, on Thursday October 10, at 6pm.

Since its inception in August 2017 the PPPA has transacted more than $440 million in premium investments from the sale of 50 properties with a very strong 86 per cent clearance rate and an average yield of 5.43 per cent.

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