Suburban shopping centre sales top $1 billion for year: CBRE

Sales of neighbourhood and sub-regional shopping centres have topped $1 billion for the year to date, according to new market analysis from CBRE, with 38 centres changing hands between January and August.

This is 37% higher than in the entire 2010 calendar year, when 28 centres were traded for a total of $713 million, with four months of the 20111 still to go.

So far this year, five sub-regional shopping centres have changed hands, including Centro Hervey Bay in Queensland, Carnes Hills Marketplace in Sydney, Point Cook in Melbourne, Ballina Central in northern NSW and Highlands Marketplace in the NSW Southern Highlands.

A total of 35 neighbourhood centres have also been traded, with this sector of the market benefiting from its bias towards food and service retailing.  Recent transactions include the $40.1 million sale of Albany Creek Shopping Centre in Brisbane to Charter Hall Retail REIT.

The Property Council of Australia defines a sub-regional shopping centre as a “medium-sized shopping centre typically incorporating at least one full-line discount department store, a major supermarket and approximately 40 or more specialty shops with a total gross lettable retail area of between 10,000 and 30,000 square metres.”

A neighbourhood centre is defined as a “local shopping centre comprising a supermarket and approximately 35 specialty shops with a total gross lettable retail area will typically be less than 10,000 square metres”.

CBRE regional director of retail investments Steve Wakeham says demand for quality retail investment opportunities is continuing to increase, despite the recent negativity in relation to the impact of internet retailing and a slowdown in retail trade.

“If the current momentum is maintained, we expect in the order of 60 neighbourhood and sub-regional sales to be concluded in 2011, particularly given that sales activity is traditionally higher in the second half of the year.”

He attributes the marked increase in sales activity to both the improved availability of debt funding and the higher volume of sales listings in 2011.

Earlier this month, Centro listed a further three regional shopping centres for sale, taking the total since July to seven.

“There has been a noticeable increase in the volume of listings this year and at the same bank finance has freed up, providing the necessary debt funding to underwrite a higher number of transactions,” he says.

Wakeham says institutional investors had been the most active purchasers this year. At the top end, this included offshore institutional investors such as GIC and the Canadian Pension Plan Investment Board, alongside local A-REITs, particularly Charter Hall, and domestic superannuation funds

“These investors have very particular requirements and are looking for centres that are either dominant now or can be redeveloped to be the dominant centre in their particular catchment,” Wakeham says, adding that the Woolworths portfolio sale had been a key litmus test for the market.

“Charter Hall’s purchase of eight Woolworths centres highlighted the attractiveness of well located, convenient, supermarket-based centres with the portfolio attracting significant interest from both local and offshore investors.”

The CBRE analysis excluded regional shopping centre sales, which tend to skew the results given the limited number of regional transactions and the high value attributed to such transactions.

It also excluded the Lend Lease purchase of ING Retail for $1.4 billion, concluded at the end of 2009.