Triple treat for Queensland retail property

Queensland is expected to continue dominating retail property sales activity this year, with the state recording $1.1 billion of sales in the first six months of the year, including 10 deals worth a total of $835.4 million.

JLL’s Queensland director of retail investments, Jacob Swan says: “Retail investment conditions in Queensland are robust.  Already in the first half of this year, $1.1 billion of sales have been recorded, which is more than three times the volume at the half-year mark in 2014″.

“Retail transaction activity in Queensland rose to $1.7 billion in 2014, up 20% year on year, reflecting the ongoing robust investment market conditions,” he says.

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But according to a Colliers International’s Investment Review, a mismatch between demand and supply in regional centres will likely result in e further yield compression for prime assets during the remainder of 2015 and 2016.

Colliers says yields for super regional centres range from 5% to 6.25% after tightening over the past three years, prime regional yields are between 5.5% and 6.5%, while secondary regional yields range between 6.5% and 7.5%.

The report states: “Demand is being driven by the low cost of debt and a river of equity from private sector savings and superannuation funds.”

“Given the current level of demand, yields for all retail categories have firmed over the financial year although the greatest movement continues to be at the smaller property end.”

Hinkler Central was sold in yet another Queensland deal worth more than $100 million

Of the 10 largest deals in Queensland in the first six months of the year, half were for sub-regional centres, while neighbourhood centres accounted for the largest proportion (nine) of deals in the top 20.

The largest deal in the state in the six months to June 30 was for the sub-regional Capalaba Central Shopping Centre, in Brisbane, which was sold to private Taiwanese company Shayher Group for $148.5 million in May on an initial yield of 7.27%.

The centre was also the largest purchase in the Australian retail sector by a Chinese investor in the last financial year, as the Chinese have not featured in the retail market in the same way that they have in other commercial sectors.

Retail transaction activity in Queensland rose to $1.7 billion in 2014, up 20% year on year, reflecting the ongoing robust investment market conditions

The second largest sale in the state was also the biggest large format retail transaction in 2014–15 – the sale of Townsville’s Domain Central for $130 million in May.

The 57,035sqm centre on a 12.3 hectare site southwest of the Townsville CBD is the largest bulky goods and outlet shopping centre in Queensland and was purchased by QIC Global Real Estate.

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Other deals over $100 million in the first six months of the year were the sub-regional Hinkler Central in Bundaberg and Oasis Shopping Centre in Broadbeach.

Hinkler Central was sold to QIC Private Capital for $110 million in May, while Oasis Shopping Centre was bought by KKR & Co for $103.5 million in February.

Speaking about the Hinkler deal, Colliers International’s head of retail investment services, Lachlan MacGillivray, says: “The demand for quality sub-regional retail assets combined with the lack of product in 2015 will lead to further cap rate compression for quality centres like this”.

10 LARGEST RETAIL DEALS IN QLD (JANUARY–JUNE 2015)

• Capalaba Central Shopping Centre, Brisbane – $148.5 million
• Domain Central, Townsville – $130 million
• Hinkler Central, Bundaberg – $110 million
• Oasis Shopping Centre, Broadbeach – $103.5 million
• Big Top Shopping Centre, Maroochydore – $85 million
• Chevron Renaissance Shopping Centre, Surfers Paradise – $73.2 million
• Lutwyche City, Brisbane – $63 million
• Whitsunday Shopping Centre, Airlie Beach – $46.98 million
• Eagle Street Pier, Brisbane – $43 million
• Aspley Village Shopping Centre, Brisbane – $32.25 million

(Source: Data extracted from Colliers International Investment Review – Retail, 2014–15)