Shopping centres in hot demand following record year of sales
Two shopping centres in Adelaide’s north-east have hit the market following the $22m sale of the Virginia Shopping Centre and amid a surge in investor demand.
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Boutique property fund manager Parkstone has added two Woolworths-anchored shopping centres to its retail portfolio amid heightened investor demand for neighbourhood and convenience-based retail properties.
The Adelaide-based group has paid $22m for the Virginia Shopping Centre in Adelaide’s north, which it plans to renovate, and $20m for a stand-alone Woolworths supermarket in the regional city of Wagga Wagga in NSW.
Neighbourhood and convenience-based shopping centres have proven to be a resilient asset class during the Covid-19 pandemic, with yields sharpening as private and institutional capital continues to target well-located, supermarket-anchored properties.
The strong market conditions have prompted Primewest to test the market with a $200m portfolio of five centres across Adelaide, Queensland and Perth.
They include the Dernancourt and Fairview Green shopping centres in Adelaide’s north-east, and are held in unlisted funds that have reached their maturity.
JLL SA managing director Ben Parkinson, who’s spearheading the Fairview Green sale alongside Roger Klem and Leedwell Property’s Andrew Zammit and Jamie Guerra, expects to field strong interest from a range of investor groups.
“Transaction activity is being driven by a range of capital sources, with private investors and syndicators actively acquiring these assets to capitalise on the low cost of debt, and this is expected to continue in the short term while interest rates remain at record lows,” he said.
“Yields for the sub-sector have been resilient given the liquidity in the private investor and syndicator market, combined with resilient performance of fundamentals through the Covid-19 crisis in terms of MAT (moving annual turnover) and rent collections.”
According to JLL figures, neighbourhood shopping centre sales reached record levels last year, generating $2.9bn across 58 transactions - almost double the $1.5bn recorded in 2020.
Population growth is a key long-term driver of food retailing and convenience retail assets, and was a key reason behind Parkstone's investment in the Virginia centre, which is located in Adelaide’s booming northern suburbs.
Parkstone managing director Tim Wilkin said the centre, previously owned by the Scaffidi family, also provided an opportunity for further upgrades, with Parkstone planning a “major renovation and repositioning” of the asset over the next 12 to 18 months.
“The new acquisitions are a neat fit with our growth strategy of acquiring predominantly food-based retail properties, which meet the needs of non-discretionary spenders, and have the potential for income growth through physical improvement and innovative leasing strategies,” he said.
“Our experience points to grocery-anchored retail centres in regional locations having continued to perform well throughout the pandemic with positive sales growth of anchor tenants across the portfolio.”
The purchases increase Parkstone’s total portfolio value to more than $100m, with a mix of retail assets in regional NSW and metropolitan Adelaide.
Savills’ Rino Carpinelli brokered the Virginia centre sale.
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