NSW retail property attracts investors
Listed property trust investment in NSW retail properties has increased dramatically in the past 12 months.
A-REITs purchased nearly a third (32%) of NSW retail properties sold during the 12 months to June 2011, according to CB Richard Ellis’s latest Sydney Metropolitan Retail MarketView.
This is up from just 14% of transactions purchased by A-REITs during the previous 12-month period.
Major purchases by A-REITs during this period include CFS’s purchase of DFO Homebush in July 2011 for $135 million and Charter Hall buying a 50% interest in sub-regional shopping centre Lake Macquarie Fair and Mt Hutton Shopping Centre in Lake Macquarie, NSW, for $33 million.
Private investors accounted for half of all NSW purchases during the period, generating $261 million in sales.
According to CBRE, A-REITs, along with private investors, have shown interest in Sydney retail properties valued under $30 million as they look to reduce their exposure to overseas assets.
Interest is focused on regional and sub-regional shopping centres.
However despite the demand, investment stock supply remains limited.
Yields have held steady at 6% for regional centres, at 7.54% for sub-regional centres and at 7.88% for neighbourhood centres. Regional centre vacancies have dropped to just 0.56%.
Other key findings include a significant portion of retailers shifting back to Pitt Street Mall, resulting in a spike in prime CBD retail vacancies in Sydney.
“King and George streets have been impacted the most; however, high-end retailer demand for stand-alone locations on these streets continues, as demonstrated by the relocation of Burberry and Louis Vuitton, “according to said CBRE retail services senior manager Leif Olson.
Olson says the opening of the second stage of Westfield Sydney has resulted in tightening vacancy, with demand exceeding supply on Pitt Street Mall.
“Pitt Street Mall vacancy remained below 1% despite the total CBD retail vacancy reaching 3.1% in the past six months,” he says.
Sydney prime rents have fallen by 11% during the previous year to an indicative $2,473 per square metre as at June 2011.
Further rental reductions are expected in the short term as national retailers closed underperforming stores to focus on Pitt Street Mall locations.
NSW retail expenditure was flat during the first half of 2011, with consumer spending patterns unlikely to increase as the year unfolds.