Melbourne retail yield secondary in foreign $8,888,888 prestige purchase: HTW

Foreign investors are no longer primarily seeking prime and super prime retail assets as a result of the high demand and low supply of quality retail assets in Melbourne, according to valuers, Herron Todd White.

"Foreign and domestic investors are becoming increasingly willing to invest in retail assets that represent a higher degree of risk," the July report noted.

"This is one reason why much of the retail market in Melbourne is currently experiencing yield compression."

The recent sale of 415-417 Collins Street, a partially vacant three- level office building with ground floor and basement retail, confirmed to HTW that investors are now prepared to accept sub 4% yields for quality retail assets.

"Selling for $8,888,888, which was $2.5 million above the reserve, this demonstrates a yield of only 2.2%," it noted.

The first quarter of 2015 had seen Melbourne large format retail experience rental increases.

"And it should also be noted that vacancy rates for large format retail have fallen significantly over the previous two years.

"The increased demand for large format retail is due primarily to the resurgence in household goods spending and increased residential construction activity," it added.