Coles locks in Balaclava site with $80m play

The race for position in the supermarket game is heating up with Coles snapping up the property beneath one of its own centres in the inner Melbourne suburb of Balaclava for about $80m.

Coles has purchased the property underneath its store in the Melbourne suburb of Balaclava. Picture: NCA NewsWire / David Crosling

The race for position in the supermarket game is heating up with Coles snapping up the property beneath one of its own centres in the inner Melbourne suburb of Balaclava for about $80m.

The lucrative purchase, which was struck on a yield on the property’s income of less than 2 per cent, shows the value of inner city sites to big supermarket operators. Rival Woolworths and even independent operators can seek to buy up sites – even from underneath where their rivals have active supermarkets – in order to lock up key locations and keep suburbs to themselves.

Just last year Woolworths bought a Sydney mall occupied by Coles in the southern Sydney suburb of Miranda and will be able to move in once the lease expires on that property for which it forked out $68m.

More than a decade ago in Sydney’s up-market Neutral Bay, Coles bought a Woolworths centre and is also likely to move on the current occupant once the tenancy runs out.

The Balaclava site was sold by interests associated with the Herszberg family. Myer Herszberg was a co-founder of Infomedia and was the founder of Melbourne’s Denman Audio chain.

By purchasing Balaclava, Coles has snared a property which is also suited to further development down the track. A company spokeswoman confirmed the property purchase but declined to comment on the price.

“Coles has been a part of the Balaclava community for 50 years and we are excited to serve local customers well into the future. The site has significant potential for us to deliver best in class customer experience and is also a catalyst for the transformation of the retail precinct,” she said.

Last year, Woolworths won approvals for a supermarket and an apartment complex on a nearby Elsternwick site that was sold off by the national broadcaster, the ABC, for about $55m.

Woolworths is now on the hunt for a property development partner to help build out a planned 139 apartment tower.