Sun shines on Neighbourhoods Centres whilst larger malls struggle

Neighbourhood and super convenient Centres are the only retail sector seeing any form of liquidity this year with over 30 Neighbourhood Centre's sold so far compared to only 8 larger Centres.

Willowdale Shopping Centre in Denham Court in Sydney's south west is the latest Neighbourhood Centre to be sold with a private investor paying $34.8m, reflecting a yield of 5.6%.

Willowdale is a brand new Coles anchored Neighbourhood Shopping Centre that is located in the thriving South West Sydney growth corridor, 50km from Sydney CBD and 30km from Parramatta.

The 5,446 square metre Neighbourhood Shopping Centre is anchored by a full-line Coles supermarket incorporating a Liquorland store. Since trading commenced October 2017, the Centre has recorded strong sales growth.

The 4,445 square metre Coles and Liquorland tenancy (together 82% of NLA) and supported by 11 complimentary specialty tenants comprising largely non-discretionary retailers and services. The weighted average lease expiry of the Centre is 10.8years and the net income is $1,962,886 or $360/sqm on average.

The Centre has a 1,695sqm pad site for further enhancement of the retail offer. The Centre sits in growing area with the population expected to increase by an annual growth rate of 12.6% to around 53,500 people by 2031. The current residents in the catchment are relatively affluent with household income 6.4% above the national average. Together these factors are expected to see the main trade area food and liquor expenditure forecast to grow to $467.6 million by 2031, representing an average annual growth rate of 16.4%, which is expected to underpin the future sales and rental growth of the Centre.

So far in 2019, there have been 30 major neighbourhood centres sales across metropolitan and regional areas across Australia with cap rates ranging from 4.7% to 8.4% depending on growth potential, tenancy mix etc.

Despite the high number of Centres being sold by Vicinity, Lend Lease, Stockland, etc, and the amount of capital in the market, only 8 major deals have been completed this year across all of the larger sized Centres, a testament to the difficulty the sector is having in clarifying the future rental earnings and capital expenditure requirements these malls are facing.