Buyers quite thirsty for a Dan Murphy’s investment

Buyer demand for essential retail assets has increased over the past year and liquor stores like Dan Murphy’s are sought after by investors thirsty for a property backed by an ASX-listed brand. 

These well-known liquor stores serve up secure incomes for investors, despite coming at the kind of high-end price point that would make even a regular Grange drinker think twice.

This Dan Murphy’s in Melbourne’s inner east sold for $21.1million. Picture: realcommercial.com.au/for-sale

Liquor stores are sought-after by buyers looking for income-generating sites with long leases, according to Colliers retail middle markets director in Victoria Tim McIntosh who last week sold a Dan Murphy’s in Malvern for $21.1 million.

“The sale result achieved is a strong message to the market that ultra-defensive freestanding retail investments backed by undoubted covenants, long lease tenure and attractive growth remain resilient in any market cycle,” Mr McIntosh said.

There were over 350 enquiries made on the 1290sqm store which sold to a private family on a yield of 3.45%, which Colliers said was the sharpest yield on a Dan Murphy’s nationally for over five years.

PropTrack senior economist Eleanor Creagh said demand from investors in the commercial sector for properties linked to big liquor store brands remains strong.

“Buyers often look for quality assets with nationally renowned brands and secure high quality long-term tenants. Dan Murphy’s is a well know brand so a retail asset with a tenant like Dan Murphy’s is likely to be on a longer-lease with fixed rent increases, so on a longer weighted average lease expiry, it could suit this profile,” she said.

“In general, demand for commercial assets remains robust, the number of searches to buy on realcommercial.com.au was up across most asset classes when comparing the first five months of 2022 with the same period last year.”

Liquor stores were one of the few businesses to benefit from the protracted lockdowns in the eastern states of Australia in 2020 and 2021, as the Endeavour Group who own Dan Murphy’s pointed out when they announced their financial results earlier this week: “Retail sales in F22 were 19.3% higher than F19, the relevant pre COVID-19 comparative period,” managing director and chief executive officer Steve Donohue said.

Liquor retailers like Dan Murphy’s who were able to provide customers with products ordered online did particularly well during lockdown, but Ms Creagh cautioned that trend may not last.

“With the pandemic in the rear view mirror and people spending on travel, leisure and entertainment again this boom in off-premise sales is reversing. That said, stores that have kept up with the rapid evolution of digital and e-commerce platforms and harnessed the consumer behavior changes throughout the Covid period can likely maintain some of this momentum,” she said.

This retail asset in Rosebery where Dan Murphy’s is the anchor tenant is expected to sell for around $14 million. Picture: realcommercial.com.au/for-sale

Investors keen to acquire an income-generating liquor store are keen on properties like this 999sqm Dan Murphy’s outlet that is the anchor tenant in a 1299sqm retail property which was for sale via an expressions of interest campaign that closed August 23.

The site in the Sydney suburb of Rosebery earns $631,689 per year plus GST and Dan Murphy’s was the “main draw card” for buyers, according to Burgess Rawson partner Kieran Burke.

“It’s definitely the main draw card, the long 15 year lease to Dan’s [Murphy’s] without a doubt. The location obviously, in inner Sydney, as well. Those are the two main drivers,” he said.

“Obviously it’s a really strong covenant, an essential service. Liquor tenants, obviously they’ve increased their trade across their portfolio through Covid. Everybody loves liquor in Australia.”

Mr Burke who was handling the sale along with partner Darren Beehag said the Rosebery site was likely to sell for around $14 million with strong buyer enquiry coming from both domestic investors who want an essential retail assets as well as overseas buyers which were mainly from south-east Asia.

Meanwhile a Dan Murphy’s in Shepparton that hit the market in May was for sale via an expressions of interest campaign which has closed, but the parties are still negotiating.

This Dan Murphy’s in Orange is the anchor tenant in a neighbourhood shopping centre currently on the market. Picture: realcommercial.com.au/for-sale

JLL’s Sam Hatcher, who last week listed  a 21090sqm retail site in Orange that has an IGA supermarket and a Dan Murphy’s as dual anchor tenants, said the liquor store was one of the asset’s most attractive features.

“Anchored by the only full-line liquor superstore in the trade area, Dan Murphy’s productivity is over 50% above industry benchmarks trading at almost $20,000 per sqm – an outstanding performer that anchors the success and growth of the asset,” he said.

Mr Hatcher is selling The Village neighbourhood shopping centre in Orange along with colleagues Sebastian Fahey and Nick Willis and the expressions of interest campaign closes at 2pm Wednesday September 14.