Strong investor interest expected in Victorian Coles supermarket

Coles Group is selling a supermarket in a Victorian tree-change town as the coronavirus pandemic increases the already-strong investor appetite for standalone supermarkets.

Agents at Stonebridge Property Group expect the newly-developed Coles Woodend will attract significant interest as the first supermarket offering in 2021, following one major transaction in Victoria last year.

The major supply/demand imbalance, a positive shift in supermarket fundamentals, stamp duty concessions and the low cost of debt are expected to drive record pricing, the agents said.

Stonebridge partner Justin Dowers said Coles had picked the perfect time to put the 3780sqm “trophy asset” on the market.

“Standalone supermarkets are extremely rare at present and fundamentals have never been better,” Mr Dowers said.

“Coles Woodend ticks all the boxes: a blue-chip supermarket achieving strong sales growth, a modern building with depreciation benefits, a long 10-year lease and a prime position opposite Woodend train station.”

Standalone supermarkets have long been an investor favourite but the pandemic has added to demand for properties with blue-chip, daily needs tenants like Woolworths, Coles, Aldi and IGA.

In late 2020 Stonebridge handled the $25.1 million sale of a Woolworths in the Victorian seaside town of Torquay to a private investor for $25.1 million at a yield of 3.65%, which the agents said represented a record yield for a regional Victorian supermarket development.

The Torquay result indicated that yield compression was highly likely across the supermarket sub-sector in 2021, they said.

Stonebridge director Kevin Tong said Woolworths Torquay attracted more than 165 enquiries and 14 offers.

“Many of our clients are used to seeing 10-15 supermarket opportunities a year, compared with one in 2020,” Mr Tong said.

“The investor appetite for supermarkets is growing consistently.”

Mr Tong added that prospective purchasers would benefit from the Victorian government’s 50% reduction in stamp duty for commercial properties bought in regional Victoria.

The Coles is located in the Victorian tree-change town of Woodend. Picture: realcommercial.com.au/sale

Built in 2018, Coles Woodend includes a Liquorland and has a new 10-year lease to Coles with additional options and a net passing income of $1.43 million.

Mr Dowers said the supermarket served a large main trade area of more than 30,000 people that was forecast to grow at more than 1.6% per annum to 2031.

“Woodend is well positioned to benefit from the ‘tree-change’ trend emerging from COVID, due to its location in a major growth corridor only one hour by train to Melbourne CBD,” he said.

Coles Woodend is being sold via an expressions of interest campaign closing 3 March.