Feb 10 2018Add to Favorites
Offshore investor interest in Western Australia’s retail market is expected to intensify in 2018, building on the $48 million worth of assets transacted in 2017.
According to CBRE Research, $458 million worth of Western Australian retail assets changed hands in 2017, up from $398 in 2016. Highlight transactions include a 50% share in Vicinity Centre’s Rockingham Centre to AMP Capital for $305 million at a yield of 5.86%.
CBRE’s Richard Cash said demand for large format centres was strong in 2017, with buyers attracted to the secure cash flow generated from long lease terms to predominantly national tenants. The underlying land value of large format centres provides for longer term development upside given many centre’s are located on key thoroughfares.
In 2017, six large format retail assets change hands for $62.90 million – averaging a per square metre rate of $2,791 and yield of 7.51%.
Neighbourhood shopping centres experienced a drop-in transaction volumes from $210 million in 2016 to $35 million in 2017, albeit this is attributed to the lack of available stock rather than weaker investment appetite.
“Neighbourhood centres remain more defensive in nature against online retail and are therefore extremely sought after in the market, particularly given a large proportion of their income is generated by major anchor tenants such as Woolworths or Coles on long term leases,” Mr Cash said.
“While supply of these assets was limited in 2017, the strengthening market and state economy will provide more confidence for shopping centre owners to test the current demand.”
CBRE’s Anthony Del Borrello said Western Australia’s retail market would continue to gain momentum in 2018, fuelled by an upturn in offshore investor interest.
“Offshore investors - mainly made up of Singaporean investors - accounted for 28% of retail purchases in Western Australia in 2017. We expect to see this flow of capital continue given the attractive yield spread, stabilisation of the Western Australian economy and Asia’s relative proximity to Perth.”
Home loan approvals have fallen significantly off the back of the APRA and the Royal Commission initiatives together with new Responsible Lending Criteria. The ABS recently reported that home loan approvals have fallen by 13.6% year on year and within that, investment loans have come back by c.20%
Off the back of successfully settling a $48m syndicated first mortgage for a residential apartment development in Sans Souci just weeks ago, Sydney-based real estate investment manager Centennial Property Group (CPG) opened a new fund with a focus on the industrial and logistics market, Centennial Industrial and Logistics Fund II (CIL II). The fund, available only to wholesale and private high net worth investors, opened on 1 November and was seeking to raise c. $38 million. CPG closed the fund less than two weeks later, well before the official close date, due to oversubscription.
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