Regional retail property had a 'year to forget' in 2011: HTW

“Stalled”, “subdued”, “dreadful”, “a year to forget” is how valuers from Herron Todd White have described the performance of Australia regional retail property markets in 2012.

Herron Todd White’s team of valuers cast their eye across markets from NSW’s Southern Highlands to the Gold Coast to south-western WA and found very few bright spots as regional centres took a hit from an overall drop in consumer confidence and a “flight to safety” mentality among buyers seeking primarily blue-chip investments.

In the NSW Southern Highlands, the market remained “subdued throughout 2011 with most retailers feeling the pinch from weak economic conditions”.

“Although relatively stable, the market has not fully recovered since the GFC,” the December report says.

“Current conditions are reflected in the vacant shops now evident along prime strips such as Bong Bong Street in Bowral.”

Despite the poor year, the outlook appears bright, with Coles buying the 4,936-square-metre Oxley Mall in Bowral for $14.75 million in May with plans for renovation and expansion.

In June, the Charter Hall Retail REIT acquired 50% of the Highlands Marketplace, in Mittagong, for $23.6 million from Woolworths, at an initial yield of 8.1%. The sub-regional shopping centre comprises 8,241 square metres and 790 car spaces and is anchored by Woolworths and big W with 36 speciality retail shops.

East of the Southern Highlands, the Wollongong retail market was dominated by the “on again, off again, on again drama” surrounding the GPT West Keira development.

The West Keira development is a $200 million project to expand the Wollongong Central shopping centre by 18,000 square metres adding 80 specialty stores.

“While latest reports suggest GPT has committed to moving forward with the project, many are still sceptical,” says HTW.

“This mirrors in personality of the current economy with 2011, which will be remembered for its high level of volatility, primarily in the global financial markets. There is no doubt economic uncertainty and volatility have had an impact on the local retail market.”

Projects that did proceed include the commencement of Stockland’s Shell Harbour shopping mall expansion.

There Wollongong City Council is also examining plans to revamp Crown Street Mall, which is in need of an upgrade. However, the proposal remains stalled with vehicle access ruled out.

In nearby Newcastle, HTW reports that the retail market “appears to have stalled under the weight of stock on the market with the GPT owned Hunter  Street  mall sites, failing to sell to local developers Buildev and now been marketed as eight separate blocks

Moving across into regional Victoria, local small retailers have advised HTW that 2011 is a year they would rather forget with the refurbishment of the Langtree Mall, the town’s retail hub taking most of the year to complete and having had a “detrimental impact on shopping patterns in the city heart to the advantage of Mildura’s Centro regional shopping centre”.

In Echuca on the Victoria/NSW border, the commercial market experienced difficulties but the year was punctuated by sales of several landmark properties including the Old Flour Mill and a number of other CBD shops at yields around 7%.

Giving an indication of the state of the retail market, the Campaspe shire has received an offer of $2.38million for a site it previously acquired in May 2006 for $3.06million.

On the Gold Coast, the 2011 sales market was dominated by sales under instruction by receivers and managers, as more and more owners have been pushed to their financial limit.

“This has resulted in a greater number of sales during 2011 as vendors are forced to meet the market rather than hold out for better days,” says HTW.

There were some signs of better things to come in 2012 with investors started to come back into the market towards the latter part of the year “with a shift in focus to service type locations, such as the old fashioned local convenience centres”.

“We noted a sale of the Mount Coolum Shopping Centre, anchored by an IGA, which achieved a sale price of $6.1 million with an analysed yield of 9% and a weighted average lease of 2.1 years.  Agents reported that interest in this type of asset had improved during the year.”

In South Western WA, the overall the retail property market was subdued during 2011 with very few sales occurring.

“Most retail properties are tightly held and the limited supply has helped to balance the weak demand,” according to HTW.

“Like many areas around the country, business performances in the small retail sector have been poor.

“As a consequence, rental rates and demand for retail space has fallen, with most retail markets in the towns of the south-west having experienced increased vacancies during the year. This is particularly evident in the Bunbury CBD where currently there are a higher number of vacancies than experienced for quite some time.”

At present, prime street front shops in Bunbury’s CBD can be rented for $250 per square metre net per annum.