Regional Supermarket Fetches Tight Yield

15 June 2022

Standalone supermarkets remain in favour with private investors, with the latest transaction of the Woolworths Supermarket in the regional town of Narrabri setting another tight yield.

The property sold for $16,500,000 in an off-market transaction managed by Savills’ agents Peter Tyson and Jon Tyson on behalf of Whistle Funds Management to an undisclosed private investor. The deal was struck at a yield of 4.4% representing a tight result for regional NSW and a sale rate of almost $5,900 per square metre.

Savills National Director Peter Tyson commented “the targeted off-market process generated offers from numerous bidders and was dominated by savvy private investors”.

“The most active buyer profile of the increasingly popular freestanding supermarket asset class has long been the agile private investor fraternity. Typically, these assets are tightly held and thinly traded, favoured by investors for the “bond-style annuity” characteristics underwritten by genuine long term lease commitments and high quality tenant covenants such as Woolworths and Coles”.

Originally developed in 2005 the 2,800sqm standalone supermarket featured a remaining lease term at the time of sale of 8.7 years plus two 10 year options. The property features a land area of 6,160sqm and onsite parking for 83 cars.

Savills Director Jon Tyson observed “The ownership profile of many standalone supermarkets nationally is dominated by high-net-worth private investors, typically domiciled in Melbourne and Sydney. Many of these groups own multiple supermarket holdings. The successful buyer of Narrabri was Melbourne based.”

“Supermarket retailers invariably seek to secure long term leasing rights which, including options terms, can run for 50-60 years. These long-term commitments by essential service providers are amongst the longest lived leases in the marketplace”, said Tyson.

Located in north-west NSW 520klms from Sydney, Narrabri is the administrative heart of the second richest agricultural region in Australia underpinned by major cotton, wheat, beef and lamb industries.

The Narrabri deal follows another similar off-sale of the freestanding Woolworths supermarket also transacted by Savills in the southern NSW town of Wagga Wagga for $20m. Steven Lerche negotiated the sale on behalf of a private investor to Adelaide-based Parkstone Funds Management.