Large format still in vogue as rates rise

One area of retail property remains hot even as pressures on consumers are increasing.

Newmark Capital joint managing directors Chris Langford (left) and Simon T. Morris.

Large format retail stores remain hot property, with the listed Newmark Property REIT snapping up a major centre in the Brisbane suburb of Underwood for $57m.

Big malls are under pressure from new waves of the coronavirus and the slow recovery of central business districts but smaller centres directed at meeting daily needs and access to national chains are performing.

The listed Newmark trust bought the 2.8ha Queensland property from the unlisted Clarence Property Diversified Fund which had bought it about five years ago for $31.25m.

The property is next to a new Bunnings store and comprises four buildings which span 11,115sq m and houses popular tenants including Officeworks, Supercheap Auto and Sydney Tools.

The trust is hoping to benefit even during the more rocky retail environment as the tenancy mix is highly defensive with more than 80 per cent of the space leased to medical uses and national retailers, providing diversification benefits.

The Newmark fund, which listed last year, now has nine properties and believes it is well placed after the debt-funded purchase, which will be accretive to the trust‘s Funds From Operations.

Newmark Capital joint managing director Chris Langford, said the high-quality property was on a significant land holding on the corner of two arterial roads in a sizeable catchment area and underpinned by leading national retailers.

“We believe that this combination of underlying real estate and tenancy mix provides for a high-quality long-term investment,” he said.

The deal was negotiated off-market by CBRE’s Joe Tynan and Michael Hedger and continues trading of such assets despite rising interest rates, which have stalled other property deals.

Last month, a private Gold Coast family fended off competition from national investors to snare another large format retail property at Burleigh Heads for $72.5m as the sector continues to draw big capital players.

The family picked up the Burleigh Home + Life, anchored by major retailers Anaconda, Autobarn and Beacon Lighting, from Gordon Corp.

Bigger deals are also still happening. An international party linked to Brisbane-headquartered Shayher Group is in due diligence to buy the Homeworld Helensvale complex on Queensland’s Gold Coast for close to $300m.

The move would be an entry to the market for the buyer and complement the group’s already rising portfolio of assets which span retail centres, offices and development sites.

And the values are being reflected in other listed trusts. HomeCo Daily Needs REIT last month recorded a $209m valuation gain on its portfolio, a 4.6 per cent increase over the first half.