Shopping centres trades bounce back as sector recovers

Malls are back in demand as more investors chase exposure to the once-shunned sector.

Shopping centres were the hardest hit by Covid-19 but trades by big Vicinity Centres and trusts run by HomeCo and Charter Hall show they’re back in demand.

The beaten-down shopping centre sector is making a comeback with the reporting season showing that landlords think they have come through the worst of the cost of living crisis and are betting consumers will open their wallets once interest rates stabilise.

One of the biggest revelations has been a run of deal-making showing that mall values are steadying after they dived during the pandemic.

Shopping centres were the hardest hit as Covid-19 fears swept through the market. But trades by big players such as Vicinity Centres and trusts run by HomeCo and Charter Hall show they are back on an even keel.

Vicinity this week revealed that it had sold several centres at a premium to their book values, partly as it looks to fund an overhaul of its prized Chatswood Chase Sydney. It sold off Melbourne’s Roxburgh Village, South Australia’s Kurralta Central and Dianella Plaza in Western Australia.

The Melbourne centre was sold to Asian-backed venture JY Group for $123.6m, a 9.4 per cent premium to book value. That transaction was brokered by Simon Rooney of CBRE.

Coles picked up Kurralta Central for $74.3m at a premium of 31 per cent, but a series of bidders were chasing the asset. That transaction was brokered by Ben Parkinson of JLL.

Perth-based funds manager Greenpool Capital had earlier bought Dianella Plaza in Perth for $76.25m at the end of 2023. Vicinity also sold that centre, at a 5.9 per cent premium, via CBRE’s Mr Rooney. He said after that deal the sub-$100m retail centre market continued to increase in buyer depth and transaction volumes, with buying dominated by private capital.

“The overall outlook for retail property is positive both from an owner and investor standpoint. Rents and values have gone through a recalibration coming out of Covid, with minimal recent or forecast supply and corresponding increased demand, an expanding buyer pool and increased liquidity,” Mr Rooney said.

Other results showed that trading is getting back to normal. HomeCo Daily Needs REIT CEO Sid Sharma said the company had bought two new Woolworths-anchored centres in western Sydney in the last half. It also sold off just over $300m worth of large format retail assets in line with book ­values.

The sales mark a change from the years when retail centres were taking heavy writedowns and only being chased by a small group of syndicators. Now listed groups are also in the buying ring.

The Charter Hall Retail REIT revealed it had teamed with an unlisted fund to buy the Eastgate Bondi Junction shopping centre in Sydney. The group and its partners are picking up the centre from superannuation-backed man­ager ISPT for about $127m after selling a series of smaller properties.

Charter Hall Retail CEO Ben Ellis said it had sold four non-core centres in regional areas for $290m and had put the proceeds into the larger complex at an attractive 6.1 per cent passing yield.

“It’s also pleasing to see new incremental wholesale capital investing in convenience retail shopping centres, recognising the attractive nature of this asset class,” he said.

JLL’s Nick Willis and Sam Hatcher and Stonebridge’s Carl Molony, Philip Gartland and Justin Dowers handled the Eastgate deal.

“We are seeing a major resurgence of local and offshore institutional capital for retail given the positive fundamentals and relative returns the sector is providing. The global engagement from core institutional capital in this shopping centre is a testament to this trend,” Mr Willis said.