Wait over for a Victorian Bunnings offering
The white-hot market for Bunnings Warehouse outlets will face another litmus test, with the first Bunnings store offered for sale in Victoria in more than six months.
The new Bunnings in Yarrawonga, to be built specifically for the hardware giant by the Pellicano Group, will be the first Bunnings sold in Victoria in 2016, and comes as investors continue to pay top dollar for the chain’s blue-chip Wesfarmers leasing covenants.
To be built on 1.46ha within the Kaiela Business Park in the regional Murray River hub, the 6863sqm store will be sold off the plan and is expected to be completed early next year.
Price crunch: Bunnings sells on record yield at portfolio auction
CBRE’s Justin Dowers, Mark Wizel, Kevin Tong and Joseph Du Rieu have been appointed to market the property, which will be located on the future corner of Commercial Rd and Frank Drive.
The sale comes after a Bunnings at Osborne Park in Perth sold last week on a record low yield of 4.65%. A Perth-based investor secured the small-scale store for $7.05 million at a Burgess Rawson investment auction in Melbourne.
The most recent Bunnings Warehouse sale in Victoria, which was regional assets in Swan Hill, sold in the second half of last year for $10.95 million.
Dowers says demand for prime leasing covenants is seeing the gap between metropolitan and regional investment yields narrow.
The new Yarrawonga Bunnings will be positioned in a major development precinct.
“We are finding that the lack of available investment grade properties for sale in metropolitan Melbourne has had a direct effect on the continual compression in yield differentiation between regional and metropolitan investment assets,” Dowers says.
“The consistent performance and revenue growth of Bunnings has been a key attraction for private and institutional investors, along with the depreciation tax benefits associated with the new asset.”
“Bunnings investments are always highly sought after, for a number of reasons. The net lease structure and fixed rental increases are favourable; along with the strength of the fundamental real estate given the strategic site allocations from Bunnings,” Wizel adds.
The Yarrawonga store will come with an initial 10-year lease, plus further options, and will fetch a net annual income of $573,000. It will also feature 143 at-grade car parking spaces.
The property will be sold via expressions of interest, which close on August 4.
