Melbourne was recently home to the largest single asset shopping centre deal in Australia since 2008, with Northland shopping centre changing hands at the value of almost $1 billion.
The landmark deal saw GPT Wholesale Shopping Centre Fund acquiring 50% of Northland shopping centre in Melbourne’s northern suburb, a share of $496 million sold by Canada Pension Plan Investment Board (CPPIB), on a core capitalization rate of 5.8% and an initial yield of 6.1%, resulting in the near billion dollar value.
The sale also marks the largest Australian transaction in the year to date across all asset classes. The predominantly single-level centre occupies approximately 92,380sq m with parking for 4,800 in addition to thorough public transport links.
Having facilitated the deal on behalf of CPPIB, Lachlan MacGillivray, national director of retail investment services at Colliers International, said this transaction highlights the growing demand for ‘fortress style’ assets.
“There is limited opportunity to purchase assets of the size and quality of Northland, and we estimate that there is in excess of AU$10billion of available capital, both domestically and internationally, chasing major retail centres in Australia,” says Mr MacGillivray.
“Super-regional centres are an attractive investment proposition for institutional investors due to their resilient historical returns…Yields for this asset class across Australia currently range between 5.25% and 6%, reflecting the significant value and core nature of this asset category.
However, the increasing demand over recent years has led to some yield compression as can be seen in the five largest shopping centre transactions since the economic downturn,” adds MacGillivray.
Colliers International believes 2014 will be another strong year for shopping centre sales following over AU$7 billion of sales in 2013, with the availability of assets, rather than a lack of capital, being the biggest market challenge.
“Improvement in the retail spending environment over the past six months will also have a flow-on effect for the retail property sector,” said Mr MacGillivray.
“Increased demand for floor space and improving occupancy levels will in turn support asset values and cap rates. As such, retail shopping centres will now turn their focus to adding value to core assets through redevelopment and repositioning in order to harness this improvement in retail spending.”