Centres of attention

Super markets: Shopping for basics has kept many retail centres an attractive sale proposition.

Neighbourhood and sub-regional shopping centres may have been hit hard by recent rounds of net asset value adjustments but for property investors at least, they’re still considered to be hot property.

A recent report released by CB Richard Ellis shows that sales of neighbourhood and sub-regional shopping centres nationally in the year-to-date total more than $1 billion, up from $713 million in 2010.

In real terms, 38 neighbourhood and regional shopping centres have changed hands over the past year, a jump ahead of the 28 sold during the previous year.

CBRE regional director, retail investments, Steve Wakeham is enthusiastic about the outlook for the sector. “The total number of sales is close to 37 per cent ahead of 2010, with four months still remaining in the year,” Wakeham says.

“If the current momentum is maintained, we expect in the order of 60 neighbourhood and sub-regional sales to be concluded in 2011.”

Some of the higher-profile exchanges of retail properties include the sale of Centro Hervey Bay in Queensland to Stockland and the $40.1 million sale of Albany Creek Shopping Centre in Brisbane to Charter Hall Retail REIT.

The increase in sales of smaller shopping centres, particularly by property industry big-hitters such as Stockland, Charter Hall and Lend Lease gives some indication that there is still a dollar to be turned in retail property in the suburbs.

CBRE senior director of retail investments Steven Lerche says neighbourhood and sub-regional shopping centres anchored by supermarket and grocery stores hold the most appeal for investors in the current environment.

“People are tending to spend more money in supermarkets than on fashion and discretionary spending” he says.

Lerche believes this is a trend that is set to continue into the medium term and that the strength of consumer spending in supermarkets gives these smaller shopping centres an outlook that is considerably more rosy than other retail asset classes.

Lerche also sees size as a crucial factor in determining the attractiveness of these smaller retail shopping centres.

“Centres with more than 20 shops are more likely to have fashion [retailers],” he says. “That’s where you’re likely to see lower occupancy rates.”

Centres with fewer than 20 shops on the other hand are more likely to be occupied predominantly by retailers selling essential goods and services, rather than the discretionary purchases that rely on a cyclical demand.

The retail sector has been affected in recent months by falling occupancy rates, which comes in large part as the rise of online shopping and general decline in retail spending.

A recent report from Jones Lang LaSalle found that the arrival of high profile international brands such as Zara and Gap had bought some relief for better positioned shopping centres that consistently deliver on traffic.

This, however, had come as little consolation for shopping centres in the suburbs and regional areas where
these international brands are yet to tread.

However, the fortunes of these smaller centres may be changing if the increasing competition among domestic and offshore investors across all retail asset classes is anything to go by.

CBRE’s Wakeham believes the sale of eight Woolworths shopping centres to Charter Hall REIT and Telstra Super for $266 million had been a key litmus test for smaller shopping centres.

“Charter Hall’s purchase of eight Woolworths centres highlighted the attractiveness of well-located, convenient, supermarket-based centres,” he says.

BRW

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