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Retail property attracts the big gun investors

Myer Melbourne in the Bourke Street mall. Photo: UA CreativeRetail investment is moving into record territory with investors seeing the potential growth starting to outweigh rival office and industrial property markets.
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This year alone, more than $650 million worth of retail property is being transacted in Sydney, Melbourne and Perth.

One of the latest listings is GPT Wholesale Shopping Centre Fund’s half share in the Westfield Woden centre in Canberra. It bought the 50 per cent stake for $321.5 million in June 2012 and Scentre​ Group is the other 50 per cent owner.

Colliers International’s head of retail investment services Lachlan MacGillivray​ is advising the GPT fund and said transactional activity for regional shopping centres had been extremely limited since the GFC, with the last transaction taking place more than two years ago.

Mr MacGillivray said there was significant yield compression for key retail assets driven by lack of activity and he would expect this to continue in the regional shopping centre space.

He said the 2016 financial year revealed a distinct increase in foreign purchaser activity, which made up 31 per cent of all investment volumes, up from just 18 per cent in the 2015 financial year.

A lower Australian dollar, together with enviable economic growth, are also acting as foreign investment catalysts for the sector.

“Investor interest is often strongest within CBD and regional retail assets that enjoy high volumes of foot traffic in growth catchments.” Mr MacGillivray said. “However, as the annualised data points suggest, these highly sought after assets come to market infrequently. In this vein, we view sub-regional centres as a compelling alternative for investors as they look to gain a foothold in the retail market.”

In another deal, TH Real Estate has paid $151.3 million for a 33 per cent interest in the Myer Bourke Street store in Melbourne, on behalf of TIAA. Simon Rooney, head of retail investments Australasia for JLL, advised on the sale.

The asset is the department store chain’s leading flagship location in one of the country’s top CBD retail destinations. The stake is being acquired from the Myer Family and is being invested alongside two existing investors.

The nine-storey property of just under 40,000 square metres was built in 1914 and fully refurbished in 2011. It is entirely let to Myer. Myer Bourke Street occupies a landmark site within the heart of the Melbourne CBD shopping precinct with unparalleled frontage to the Bourke Street Mall.

It comes as the South African-based Woolworths sold the David Jones store at 77 Market Street, Sydney, to Scentre Group and Cbus for $360 million. The store will be redeveloped into a luxury retail centre with apartments on top. CBRE and Savills advised on the sale.

There are also suggestions that Scentre Group and Stockland are looking at the Washington H. Soul Pattinson & Company building at 160 Pitt Street being sold by JLL’s directors Simon Rooney and Rob Sewell, alongside financial adviser Pitt Street Real Estate Partners, with a value of more than $100 million.

Stephen Philp, head of capital transactions for TH Real Estate Australia, said the Myer acquisition fitted the group’s strategy of owning dominant, well-located, prime retail properties that cater to today’s occupier needs, in the world’s most attractive real estate markets.

“The property’s location at the centre of the strengthening core retail precinct in the Melbourne CBD is supportive of Myer’s long-term occupancy of its flagship store,” Mr Philp said.

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