Sydney Retail Dec Qtr 2007
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PRESTON ROWE PATERSON
Preston Rowe Paterson NSW Pty Limited A.B.N 61 003 139 188 Level 11, 80 Clarence Street, Sydney, NSW 2000 Phone: +61 2 9292 7400 Fax: +61 2 9292 7404 Email: [email protected] Web: www.prpaustralia.com.au
Sydney Retail Market Report December Quarter 2007
Directors Gregory J. Preston B.Com., Ass.Dip.Val., FAPI Mobile: 0408 622 400 Email: [email protected] Gregory C. Rowe B.Bus., FAPI (Plant + Machinery) Mobile: 0411 191 179 Email: [email protected]
www.prpaustralia.com.au
Corporate Property Services Real Estate Valuers Plant & Machinery Valuers Property and Asset Managers Property Investment Consultants Property Development Consultants Research Analysts Listed Fund and Syndicate Advisers
Australian Offices Adelaide Phone: + 61 9292 7400 Ballarat Phone: + 61 3 5334 4441 Brisbane Phone: + 61 7 3846 2822 Canberra Phone: + 61 2 6257 7112 Central Coast & Hunter Phone: + 61 2 4324 0355 Gippsland Phone: + 61 3 5672 4422 Gold Coast Phone: + 61 7 5574 2599 Melbourne Phone: + 61 3 9602 1333 Mornington Phone: + 61 3 5975 0480 Perth Phone: + 61 8 9221 1188 Sydney Phone: + 61 2 9292 7400
Preston Rowe Paterson are actively involved in valuation and consultancy relating to various forms of retail property. These include strip retail shops, bulky goods retail centres, neighbourhood and regional shopping centres and theme shopping centres, including theatres and the like. We also act for national retailers in preparing capital valuations for acquisition and disposal purposes and also rental valuations for leased premises. Set out herein is our quarterly research report, which considers the New South Wales retail property markets including matters such as sales, leasing and development activities.
INSIDE THIS ISSUE: Retail Indicators
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City Centre
4
Super Regional Centre
5
Major Regional Centre
6
Regional Centre
8
Sub-Regional Centre
In addition to carrying out valuations and consulting in the retail sector, we also undertake retail property and asset management on behalf of clients.
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Neighbourhood Centre
10
Bulky Goods Centre
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About Preston Rowe Paterson
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New Zealand Office Auckland Phone: +64 9 921 5140 Powered By:
Please contact either Greg Preston or Greg Rowe if you have any retail valuation or asset management requirements. Please note: that whist we endeavour to use the latest data available some figures may not incorporate the effects of recent interest rate rises, effects of the stock market crash and the continuing sub-prime credit crisis in the US. We expect some graphs to trend downwards as updated data becomes available.
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Preston Rowe Paterson December Quarter 2007
Retail Indicators
Retail Indicators
Retail Turnover $million
0.5
6200.0 0 6100.0 -0.5
6000.0
-1
5900.0 5800.0
-1.5
5700.0
-2 Dec-2007
Nov-2007
Oct-2007
Sep-2007
Aug-2007
Jul-2007
Jun-2007
May-2007
Apr-2007
December 2006 to December 2007 Total Retail Turnover ($ million)
Total Retail Sector % Change
Source: PRP Research/ ABS 8501.0 Retail Trade
NSW Retail Turnover by Industry Group December 2007 Hospitality & Services Industries $1191.6m
Food $2455.9m
Other Retailing $535.5m
Recreational Goods $221.0m Department Stores $460.0m Household Goods $841.4m
Clothing & Soft Goods $405.4m
Source: PRP Research/ ABS 8501.0 Retail Trade
Retail Spending and Consumer Sentiment 130.0
20,500
120.0
19,500
100.0
90.0
19,000
80.0 18,500 70.0
18,000 Dec-2007
Nov-2007
Oct-2007
Sep-2007
Aug-2007
Jul-2007
Jun-2007
May-2007
Apr-2007
Mar-2007
Feb-2007
Jan-2007
The second interest rate rise in November also saw the consumer sentiment index decline by 4.2 per cent to 110.5 November 2007, down from 115.3 in October 2007.
Retail Spending ($ million)
20,000 110.0
60.0
The impact of the first August interest rate rise did not adversely impact retail trade as shown by a slight increase in retail spending as Australian retail trade (current prices) rose by 0.8 per cent in August and 0.8 per cent in September to approximately $19.7 billion and $19.861 billion respectively. However, the consumer sentiment index fell 8.1 per cent to 111.1 in August, down from 120.8 in July.
Quarterly Percentage Change (%)
1
6300.0
Mar-2007
In December 2007, approximately $20.131 billion was spent on retail trade, up by 0.4 per cent over the month.
1.5
6400.0
Feb-2007
Retail Spending & Consumer Sentiment The volume of retail spending from Australian shoppers over the course of 2007 appeared to have displayed some resilience to the two interest rate rises, in August and November, as retail spending increased by an average 0.6 per cent per month.
2
6500.0
Jan-2007
The Other Retailing sector emerged with the highest annual growth in sales turnover over the year outperforming all other retail sectors with an increase of 14.8 per cent to $630.8 million.
6600.0
Dec-2006
The second graph on the right shows the breakdown of the Retail turnover by industry group. Much of the turnover in the state’s retail market is largely contributed by the Household Good Retailing sector and also the Recreational Good Retailing sector, increasing by 3.39 per cent and 2.02 per cent over the month to $630.8 million and $929.4 million respectively.
NSW Retail Turnover (2007)
Westpac-Melb Institute Consumer Sentiment Index
Retail Turnover The graph on the top right shows the total sales turnover for the retail sector in NSW over 2007. Over the analysed period the total sales turnover has trended upwards. Total sales turnover for the retail sector in NSW increased by 8.2 per cent over the year to December 2007 to $6,534.1 million, also reflecting a slight 0.5 per cent increase from the previous month of November 2007.
January 2006 to December 2006 Westpac-Melb Institute Consumer Sentiment Index
Retail Spending ($ million)
Source: PRP Research/ RBA Bulletin
Whilst the two interest rate rises have been blamed for the subsequent falls in consumer sentiment, the Australian retail market still appeared resilient.
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By the end of December 2007, consumer sentiment increased by 1.8 per cent.
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Preston Rowe Paterson December Quarter 2007
Retail Indicators
After the first interest rate increase in August 2007, the number of new motor vehicle sales in NSW declined by 1.1 per cent over the month to 26,558 in seasonally adjusted terms.
New Motor Vehicle Sales in NSW 28,000 Number of New Motor Vehicle Sales
Motor Vehicle Sales Retail demand for new motor vehicle sales appeared to experience marked fluctuations with a general trend upwards, mostly reflecting high oil prices and the increased interest rates.
27,000 26,000 25,000 24,000 23,000 22,000 Dec-07
Nov-07
Oct-07
Sep-07
Aug-07
Jul-07
Jun-07
May-07
Apr-07
Mar-07
Feb-07
Jan-07
Dec-06
Nov-06
Oct-06
Sep-06
Aug-06
Jul-06
Jun-06
May-06
Blacktown recorded the strongest population growth with a population increase of 1.8 per cent; a rise of 4,933 people. This was closely followed by Sydney LGA population growth increasing by 4,135 people.
Apr-06
December 2005 to December 2007
Source: PRP Research/ABS 9314.0 Sales of New Motor Vehicles
Economic Indicator Cash Rate 90 Bank Bill Rate 10 Year Bond Rate Consumer Price Index (all groups) Unemployment Rate Dwelling Approvals - Private sector (mthly) Non Residential approvals - Private sector (mthly) Westpac - Melbourne Institute Consumer Sentiment Index (Base 100)
Rate as at March 25 7.25% 7.77% 6.130% 160.1 4.1% n/a n/a
Rate 3 months prior 6.75% 7.24% 6.36% 160.1 4.4% 12,600 $1,841m
Rate 12 months prior 6.25% 6.53% 5.84% 158.6 4.5% 12,100 $2,195m
88.6
112.5
115.5
Source: PRP Research/ABS and RBA Bulletin
Areas which are characterised by high population growth will provide a supply of labour and also a source of demand for the shopping centres.
Strongest Population Growth Areas 2006 to 2007 5.0%
4.0%
3.0%
2.0%
% Change
The chart on the lower right displays the Local Government Areas (LGAs) across NSW which recorded the strongest population growth over the year to 2007.
Mar-06
Strong Population Growth Areas A major determinant of Australia’s retail property market has been factors relating to population growth and the distribution of the population.
Feb-06
Whilst motor vehicle sales have improved, concerns for rising crude oil prices and the global credit crisis, will continue to add to existing concerns for affordability in the motor vehicle retail market.
Jan-06
Dec-05
Latest available figures for December 2007 saw a slight decrease in the number of new motor vehicle sales falling by 0.2 per cent to 27,610.
1.0%
0.0%
Largest Growth Decline
-1.0%
-2.0%
-3.0% Blacktown (C)
Sydney (C)
Parramatta (C)
Auburn (A)
Bankstown (C)
Liverpool (C)
Baulkham Hills (A)
Holroyd (C)
Maitland (C) Moree Plains (A)
Local Government Area
Source: PRP Research/ABS 3218.0 Regional Population Growth
Also notably, Auburn LGA population increased by 4.2 per cent, rising by 2,882 people However, recent statistics have identified that the Moree Plains LGA experienced the state’s largest decline in population, down by 1.9 per cent reflecting the loss of 280 people. Powered By:
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Preston Rowe Paterson December Quarter 2007
City Centres
City Centre GLA > 1,000 sqm Within an arcade or mall development Promoted as an entity within a major Central Business District (CBD) Property Council of Australia • • •
There are currently 45 retail City Centre type shopping centres within the NSW market accounting for approximately 6.6 per cent of total retail gross lettable area (GLAR) (385,528 sqm).
The Sydney CBD retail market is the tightest on record as businesses compete for limited remaining space after the closure of Pitt Street Mall for redevelopment. The withdrawal of the retail space in the mall has pushed rents up with shops that had been charging $1,900 per square metre now pushing $3,000 per square metre. The outlook for the CBD is to remain tight for at least two years. The CBD vacancy rate fell to 1.3 per cent in December 2007 from an already tight 1.4 per cent in April 2007. The closure of the “super prime” Pitt Street Mall has made nearby retail zones attractive including the new Ivy complex in George Street and the Met centre. Before its closure, Pitt Street Mall was generating $6,350 per square metre and yields were between 4.75 per cent and 5.75 per cent. Prime locations in the Sydney CBD were on a yield of 4.75 per cent to 7.5 per cent in the final quarter of 2007, with rents of about $2,400 per square metre being charged. Secondary CBD site yields were 6.5 per cent to 8 per cent and rent was $1,359 per square metre. Given the high entry barriers such as finding suitable retail space and the extensive development approval process, freehold ownership for City Centre retail assets continue to be tightly held. The market is currently dominated by cashed up property funds such as Westfield, GPT, Thakral and Mirvac due to their ability to largely own, develop and manage shopping centres which have otherwise been difficult for smaller scale private investors.
Market Activity Development Pipeline It is understood that Bovis Lend Lease will develop the tower at the Mid City Centre redevelopment which is scheduled for completion in 2010 whilst leasing and management will be administered by Lend Lease Retail.
The City CBD retail market will also see construction works begin for Westfield’s controversial $600 million Pitt Street mall development which plans to increase the current 31,000 square metres gross lettable area to 38,000 square metres. With limited available retail space, the market has seen many existing retail asset owners undertake redevelopment and refurbishment activities as they take advantage of the value-added opportunities to maximise rental income and asset value. A summary of other construction projects are detailed in the table below. CENTRE Queen Victoria Building
SUBURB
CONSTRUCTION TYPE
SYDNEY
Extension
The Esplande
TERRIGAL New
SPACE (SQM) COMPLETE 5,300
Dec-08
4,666
Dec-09
Source: Reed Construction Data and various sources
Investment Sales In February 2007, The Australian Prime Property Fund emerged with the purchase of a 25 per cent stake in Sydney’s Mid City Centre for $70 million. The site is currently under construction and will comprise 55 shops with a 30 level office tower on top due for completion in 2010. In April 2007, the GPT Group launched their $2 billion shopping centre fund. GPT received cash proceeds of $1.2 billion in March 2007 as consideration for the sell down of its interest in the Fund (currently 40 per cent of the Fund). Through this holding the GPT Wholesale Shopping Centre Fund sold the Wollongong Central shopping centre to GPT group for $217.0 million. Leasing Market With the closure of the Mid City Centre (currently under construction) in Pitt Street Mall a number of neighbouring shopping areas have become popular including; The Ivy complex in George Street - has leased space to Mimco, Portmans, and Peter Alexander, and the Met Centre linking George Street and Wynyard train station - a number of fashion stores have moved in as well as chocolatier Max Brenner.
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Preston Rowe Paterson December Quarter 2007
Super Regional Centre
Super Regional Centre GLA > 85,000 sqm Two or more full line department stores One or more full line discount department stores Two supermarkets Approximately 250 specialty shops Property Council of Australia • • • • •
There are currently 8 Super Regional type shopping centres within the NSW market accounting for approximately 13.7 per cent of total GLAR (803,113 sqm)
The Super Regional shopping centres market continues to be dominated by the Westfield Group which accounts for over 50 per cent of the total gross lettable area.
Super Regional Shopping Centres Moving Annual Turnover Per Square Metre $9,000 $8,500
Moving Annual Turnover ($/sqm)
With high barriers to entry, Super Regional shopping centres have been tightly held and subject to major redevelopment activities underpinned by strategic actions to add value to existing assets.
$8,000 $7,500 $7,000 $6,500 $6,000 $5,500 $5,000 $4,500 $4,000 Erina Fair
Since its redevelopment, Westfield Parramatta now accommodates for an additional 70 new specialty shops, upgraded arcade and 200 new car spaces; still remaining the largest Super Regional Shopping Centre within the NSW market. The graph on the top right illustrates the moving annual turnover per square metre for all the super regional shopping centres for 2007. Westfield Parramatta recorded a 6.04 per cent rise in moving annual turnover (MAT) sales for the year to December 2007, reflecting a MAT rate of only $5,112/sqm. Despite being exposed to the highest pedestrian estimate of 22.3 million people (see second graph on the right), this figure was well below the average MAT rates recorded for all Super Regional Shopping centres in the NSW market at $6,411/sqm. The strongest performing Super Regional shopping centre in terms of moving annual turnover on a per square metre basis was Westfield Bondi Junction with a MAT of $8,801/sqm (up by 9.4 per cent from 2006). Other top performers included Warringah Mall with a MAT of $6,542/sqm.
Macquarie Centre
Warringah Mall Westfield Bondi Junction
Westfield Hornsby
Westfield Miranda
Westfield Parramatta
Super Regional Shopping Centre
Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007
Pedestrian Estimate - Super Regional Shopping Centres 25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0 Erina Fair
Macquarie Centre
Warringah Mall Westfield Bondi Junction
Westfield Hornsby
Westfield Miranda
Westfield Parramatta
Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007
Market Activity Investment Sales Super regional assets continue to remain tightly held over 2007 with only one reported major sales transaction. GIC Real Estate purchased a 50 per cent stake in Westfield Parramatta for $717.5 million reflecting a rate of $10,250/sqm.
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50% stake in Westfield Parramatta Sold for $717.5 million Associated Globally
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Preston Rowe Paterson December Quarter 2007
Major Regional Centre
Major Regional Centre 50,000 to 85,000 sqm GLA Extensive coverage of full range of retail needs Usually includes entertainment and leisure attractions Broad range of shopper facilities and amenities Property Council of Australia • • • •
There are currently 16 Major Regional type shopping centres within the NSW market accounting for approximately 18.4 per cent of total GLAR (1,080,485 sqm)
The graph on the right illustrates the moving annual turnover (MAT) per square metre and specialty sales per square metre for all the major regional shopping centres for 2007. Top performers in the NSW Major Regional type shopping centre market on a MAT per square metre basis were Westfield Penrith ($6,960/sqm) and Westfield Chatswood ($6,812/sqm).
Major Regional Shopping Centres Westfield Tuggerah Westfield Penrith Westfield Liverpool Westfield Hurstville Westfield Eastgardens Westfield Chatswood Westfield Burwood The Broadway Shopping Centre Macarthur Square Chatswood Chase Centro Roselands
00
00 3, 0
2, 0 $2
$2
00
00
00
00
1, 0 $2
0, 0 $2
00
00
00
00
00
9, 0 $1
8, 0 $1
7, 0 $1
6, 0 $1
5, 0 $1
00
3, 0
2, 0
4, 0 $1
$1
0
0
0
0
0
00 1, 0
$1
$1
0, 0
$1
,0 0 $9
,0 0 $8
,0 0
,0 0
$7
$6
0
0
0
0
,0 0 $5
,0 0 $4
,0 0
00
Moving Annual Turnover ($/sqm)
Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007
Centro Bankstown however, revealed a weaker performance on a moving annual turnover basis for both specialty stores ($8,615/sqm) and total shopping centre sales ($3,553/sqm).
Pedestrian Estimate - Major Regional Shopping Centres 20,000,000 17,500,000 15,000,000 12,500,000 10,000,000 7,500,000 5,000,000 2,500,000 Westfield Tuggerah
Westfield Penrith
Westfield Liverpool
Westfield Hurstville
Westfield Eastgardens
Westfield Chatswood
Westfield Burwood
The Broadway Shopping Centre
Macarthur Square
Chatswood Chase
0 Centro Bankstown
Also notably, Centro Roselands outperformed Westfield Tuggerah and Centro Bankstown on a MAT basis with a turnover of $4,295/sqm, despite having one of the lowest pedestrian estimates (see second graph on the right) of just over 8.1 million people and lower retail gross lettable area (GLAR) of 59,521 square metres. This is in comparison to a pedestrian estimate for Westfield Tuggerah and Centro Bankstown of 10.1 million people and 14 million people respectively and GLAR of 72,590 square metres and 77,666 square metres respectively.
$3
,0 0
,0 0 $2
$1
$/sqm Specialty Sales $/sqm
Centro Roselands
In the category for specialty sales, Chatswood Chase outperformed all other Major Regional shopping centres with a Specialty MAT of $21,804/sqm from its 140 specialty stores followed by Westfield Eastgardens with a specialty MAT of $20,241/sqm.
$-
Centro Bankstown
Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007
Market Activity Development Pipeline A vast majority of the Super Regional shopping centres have either recently completed extensive redevelopment works or still reconstructed along the development pipeline in the medium term. A summary of the construction projects for major regional shopping centre are detailed in the table on the right.
CONSTRUCTION TYPE
SPACE (SQM)
COMPLETE
CENTRE Centro Bankstown (stage 2)
SUBURB BANKSTOWN
Extension
4,032
Dec-08
Keira West Centre Chatswood Chase Centro Roselands
WOLLONGONG CHATSWOOD ROSELANDS
Extension Extension Extension
84,000 13,700 2,346
Dec-08 Jul-09 Dec-09
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Source: Reed Construction Data and various sources
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Preston Rowe Paterson Major Regional Centre Investment Sales Major Regional type shopping centres continue to be held tightly by retail giants Centro and Westfield over 2007 with only three reported major sales transactions from CFS Retail Trust, GPT Group, and DB RREEF CFS Retail Trust purchased a 50 per cent stake in the refurbished Chatswood Chase shopping centre for a reported value of $281.5 million. The building area is 49,450 square metre which equates to a building rate of $11,385 per square metre. The deal was transacted on an initial yield of 5.25 per cent substantially leased.
December Quarter 2007
50% stake in Chatswood Chase sold for $281.5 million
The other major sale was a 50 per cent stake in Macarthur Square by the GPT Wholesale Shopping Centre Fund to GPT Group for $205.75 million. The building area of Macarthur Square is 90,500 square metres which equates to a sale price of $4,547 per square metre. Like GPT Group, DB RREEF Trust established DB RREEF Wholesale Property Fund in 2007. The trust entered into a conditional contract in August 2007 with the fund to sell at book value 50 per cent of its interest in major regional centre Westfield Hurstville for $307.5 million. Leasing Market One lease transaction for major regional shopping centre was Di-Mensions leasing 47 square metres of space in Centro Bankstown at a rate of $572.40 per square metre on a lease term of 5 years with a rental increase of 4 per cent every year. This will give Centro an initial annual rental income of $26,903 per annum.
50% interest in Westfield Hurstville sold for $307.5 million
Another lease transaction involved Neami Ltd occupying 288 square metres of space at Westfield Eastgardens at a rate of $270.00 per square metre on a term of 3 years with the option to extend for another three years.
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Preston Rowe Paterson December Quarter 2007
Regional Centre
Regional Centre 30,000 sqm to 50,000 sqm Full line department store and full line department store One or more supermarkets 100 specialty shops Property Council of Australia • • • •
There are currently 15 Regional Centre type shopping centres within the NSW market accounting for approximately 9.8 per cent of total retail gross lettable area (576,571 sqm).
The worst performing regional shopping centre over 2007 was Campbelltown Mall with a MAT rate of $4,835/sqm and a pedestrian estimate of 4.7 million people (see second graph on the right).
$8,000 $7,500 $7,000 $6,500 $6,000 $5,500 $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 Westfield Warrawong
Westfield Mt Druitt
Westfield Kotara
Tweed City Shopping Centre
Stockland Wetherill Park
Stockland Shellharbour
Stockland Glendale
Stockland Forster
Stockland Bay Village
Park Beach Plaza
Charlestown Square
Lake Haven Shopping Centre
$2,000 Campbelltown Mall
Lake Haven shopping centre emerged as the leading Regional shopping centre with the highest moving annual turnover (MAT) per square metre of $8,126/sqm in 2007 (see top graph on the right), well above the average Regional centre MAT of $5,764/sqm.
Regional Shopping Centres 2006 Moving Annual Turnover Per Square Metre $8,500
Moving Annual Turnover ($/sqm)
The nature and scope of Regional type shopping centres in the NSW market is largely underpinned by a broad mix of investor demand from property funds such as Stockland and Westfield, syndicates and large scale purchasers who have suitable credentials.
Regional Shopping Centre
Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007 Pedestrian Estimate - Regional Shopping Centres 12,000,000 11,000,000 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000
Market Activity Development Pipeline Stockland and Shellharbour City Council have been working together to redevelop Stockland Shellharbour (pictured on the right). The $200 million plus refurbishment upon completion will add 30,000 square metres of retail space over 3,000 car spaces and provide consumers with a department store, three discount department stores, two supermarkets, and over 200 specialty shops.
5,000,000 4,000,000
Westfield Warrawong
Westfield Mt Druitt
Westfield Kotara
Tweed City Shopping Centre
Supa Factory Outlets Tuggerah
Stockland Wetherill Park
Stockland Shellharbour
Stockland Glendale
Stockland Bay Village
Park Beach Plaza
Lake Haven Shopping Centre
Charlestown Square
3,000,000 Campbelltown Mall
Despite having the smallest pedestrian estimate of 3.8 million, Stockland Glendale had a high MAT rate of $6,232/sqm – well above the average of $5,764/sqm.
Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007
Stockland Shellharbour
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Preston Rowe Paterson December Quarter 2007
Sub-Regional Centre
Sub - Regional Centre 10,000 to 30,000 sqm One full line discount department store Major supermarket Approximately 40 specialty shops Property Council of Australia • • • •
There are currently 82 Sub-Regional Centre type shopping centres within the NSW market accounting for approximately 24.2 of total retail gross lettable area (1,420,312 sqm)
A feature of the NSW Sub-Regional retail market is that rather than being dominated by one or two major property funds and syndicates, there is evidence of a diverse mix in owner types ranging from listed property trusts and syndicates to private investors/owner occupiers and superannuation funds such as ISPT.
Top City Ryde Development
Given the number of active retail players within the market, smaller investors will continue to compete with market-leading positioned players such as Stockland and Centro who aim to specialise in sub-regional shopping centres through their affluent acquisitions and developments.
Market Activity Development Pipeline Development activities remain strong, with one newly proposed shopping centre and other projects from redevelopments currently under construction. Further extension projects currently under construction are detailed in the table on the right and include Centro’s 8,700 square metre extension at Toormina Gardens Shopping Centre and a 17,536 square metre extension at Centro Lake Macquarie. The biggest project comes from the 78,215 square metre extension of the Top Ryde Shopping Centre where development work has commenced on the $1.1 billion town centre in Sydney’s north-western suburbs.
Artist's Impression
CENTRE Bonnyrigg Plaza Armidale Centre Toormina Gardens Shopping Centre Centro Lake Macquarie
SUBURB BONNYRIGG ARMIDALE
Gowrie Street Mall
TOORMINA
CONSTRUCTION TYPE
Extension New Extension
SPACE (SQM) COMPLETE 13,772 Mar-08 21,255 Mar-08 8,700
Nov-08
MOUNT HUTTON Extension
17,536
Dec-08
SINGLETON
10,500
Mar-09
Extension
Source: Reed Construction Data and various sources
The centre is on the corner of Devlin Street and Blaxland Road and will be called Top Ryde City. It will be four times as big as the existing 20,000 square metre mall and will include child care, a gym, multi-level parking, significant infrastructure improvements and pedestrian bridges.
Investment Sales Sub-regional assets appeared to be tightly held over 2007 with only one reported major sales transactions from GPT Group. The Group acquired Carlingford Court from their Wholesale Shopping Centre Fund for $192 million reflecting a rate of $5,801/sqm on the property’s purchase price.
The retail component is expected to be completed over three stages, with stage one opening before Christmas 2009.
Anchor tenants include Target (8,100 sqm), Woolworths (3,869 sqm), Coles (3,500 sqm) and 112 other specialty stores.
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Preston Rowe Paterson December Quarter 2007
Neighbourhood Centre
Neighbourhood Centre GLA less than 10,000 sqm Local shopping centre with supermarket Approximately 35 specialty stores Usually located in residential areas Property Council of Australia • • • •
There are currently 217 Neighbourhood type shopping centres within the NSW market accounting for approximately 17.0 per cent of total retail gross lettable area (998,203 sqm)
Investor demand within the neighbourhood shopping centres market is largely characterised by highly active institutional players such as both listed & unlisted funds including GPT Group, FKP Property Group, Becton and Unity Plus Investments and private syndicates.
The overall $360 million project will comprise a new railway station line for the new ChatswoodEpping Rail line; a new bus interchange; three residential towers comprising a total of five hundred apartments; and the new Metro Chatswood Shopping Centre.
Much of the competition has also been driven by increasing interests from private investors/owner occupiers who have emerged into the market over the year and accounting for a growing share of ownership in neighbourhood shopping centres.
The shopping centre located on Victoria Avenue in Chatswood will provide 11,500 square metres of retail space with the Precision Group controlling and managing the future leasing of the ongoing development.
The success of neighbourhood shopping centres and their ability to attract investors through rental income on long term leases has also been underpinned by giant supermarket tenants - Coles Group and Woolworths.
Metro Chatswood Development
With over 740 Coles and over 190 Bi-Lo supermarket stores across Australia and the trade area of Woolworth’s supermarkets increasing by 5.7 per cent in 2007, these supermarkets will have a significant ability to shape the retail landscape of Australia’s food and grocery sector within neighbourhood shopping centres. Retail trends such as one-stop shopping trips for everyday retail needs and food-based shopping trips have all highlighted the importance for neighbourhood shopping centres to provide a supermarket situated in a strategic location convenient for consumers in the local area.
Market Activity Development Pipeline Metro Chatswood The Precision Group has seized the opportunity to buy a new neighbourhood shopping centre to be named ‘Metro Chatswood’, following its completion at the end of 2008 for an agreed minimum price of $83 million. Metro Chatswood shopping centre is part of the Chatswood Transport Interchange development, one of the largest joint public-private infrastructure projects ever undertaken in Australia.
Artist's Impression
Stockland Cammeray Stockland has acquired the retail component of Cammeray Square, a new mixed use development on Sydney’s lower north shore, for approximately $42 million. Cammeray Square, which includes both residential and a retail component, is being developed by Hamptons Development Group and will include a total gross lettable area of approximately 5,000 square metres across four levels of retail space. Stockland will acquire the retail and retail parking levels on completion of the development in August 2008. The retail centre will be branded Stockland Cammeray and Stockland will undertake the leasing, tenancy design, marketing and delivery of the retial component. 10
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Preston Rowe Paterson December Quarter 2007
Neighbourhood Centre Some major neighbourhood centres currently under construction are summarised in the table on the right.
CENTRE SUBURB Northlakes Shopping Centre SAN REMO Chester Square Shopping Centre CHESTER HILL
Investment Sales Demand for neighbourhood shopping centres remained buoyant over the year with over 12 reported sales transactions totalling an estimated value in excess of $300 million.
Riverfront Plaza
KEMPSEY
Waterworth Drive Orange Metro Plaza Morisset Central Shopping Centre
As a result of limited supply levels and increasing demand from a broad spectrum of investors, yields have shown signs of compression. An indicative yield of around 6.78 per cent has been reflected from the number of sales transactions with yields ranging from 5.05 per cent to as high as 8.00 per cent which were achieved from the Norton Plaza Shopping centre sale ($112 million) and Maitland Marketplace ($4.3 million) respectively. The most significant sale involved the Norton Plaza Shopping Centre in Leichhardt in October 2007 selling for $112 million. The 10,495 square metre centre is anchored by Coles and was transacted on an initial yield of 5.05 per cent fully leased. Other notable neighbourhood shopping centres sold in 2007 included Forestway Shopping Centre ($78.1 million), Illawong Village ($30 million), Kareela Shopping Centre ($22.6 million) and East Mall Shopping Centre ($16.150 million). Details of the highest sales transaction for neighbourhood shopping centres for 2007 are included in the table below.
CONSTRUCTION TYPE
SPACE (SQM)
COMPLETE
New
4,750
May-08
Extension
7,900
Jun-08
New
6,279
Jul-08
MOUNT ANNAN
New
4,650
Jul-08
ORANGE
Extension
1,342
Sep-08
MORISSET
New
8,576
Dec-08
Source: Reed Construction Data and various sources
Leasing Market The Precision Group has secured Woolworths to anchor its new Metro Chatswood shopping centre. Woolworths has committed to a 2,700 square metres supermarket on a 20 year lease with options. The new supermarket will be located directly opposite the entrance to the new Chatswood Railway Station. Precision acquired the vacant office building adjoining the Metro Chatswood site from Sydney Water Corporation for $14.1 million. The company has secured development approval to convert the ground floor of the office building into the Woolworths tenancy and integrate it with the Metro Shopping Centre. Other leases established occurred at Eastwood Village Square – A Photographic shop was leased to Jin Lin Yang at a rate of $1,055.45/sqm over 44 square metres for a term of 4 years with the option to extend for another 4 years; Sunny Roy Ltd leased 105 square metres at a rental rate of $784.57/sqm on a term of 3 years with an option to extend for 3 years. Go-Lo has leased 536.2 square metres at Southpoint Shopping Centre in Hillsdale at a rate of $173.22/sqm. Three stores underwent rent reviews at Miller Shopping Centre which are detailed in the table below. AREA RENT/SQM (SQM)
LESSEE
Sold for $112 million
Sold for $78.1 million
Franklins
$
155.52
1,543.8
Woolworths Limted
$
109.97
3,551.0
Mitre 10
$
181.33
925.0
Source: Commercial Property Monitor
SALES MONTH
BLG BLG AREA RATE/SQM
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PROPERTY
SUBURB
QUALITY
SALE PRICE
Norton Plaza Shopping Centre
LEICHHARDT
Modern
$ 112,000,000
Oct-07
Forestway Shopping Centre
FRENCHS FOREST Secondhand
$
78,100,000
Apr-07
9,600
$
8,135
Illawong Village Shopping Centre
ILLAWONG
Refurbished
$
30,000,000
Apr-07
6,600
$
4,545
7.25%
Kareela Shopping Centre
KAREELA
Secondhand
$
22,600,000
Jun-07
4,152
$
5,443
6.12%
East Mall Shopping Centre
ARMIDALE
Secondhand
$
16,150,000
Oct-07
5,562
$
2,904
7.99%
Boambee Central Shopping Centre
COFFS HARBOUR
Secondhand
$
10,950,000
Feb-07
8,046
$
1,361
6.46% 11
Source: Commercial Property Monitor
10,495 $
5,801
YIELD 5.05%
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Preston Rowe Paterson December Quarter 2007
Bulky Goods Centre
Bulky Goods Centre GLA greater than 5,000 sqm Dominated by bulky goods retailers (furniture, white goods and other home wares) Located adjacent to large regional centre or in non-traditional retail locations Property Council of Australia • • •
There are currently 27 Bulky Goods type shopping centres within the NSW market accounting for approximately 9.1 per cent of total retail gross lettable area (535,947 sqm)
Market Activity As one of the fastest growing retail sectors, Australia’s bulky goods retail sector has successfully established itself as a major part of Australia’s retail landscape. Major property trusts/funds, including large retailers themselves have been able to capitalise the success of the bulky goods industry through their developments, redevelopments and acquisitions. The highly competitive environment for the bulky goods sector has been largely characterised by competing interests between: • major funds/syndicates and investors to attract quality anchor tenants; • developers and retailers in finding suitable site and land opportunities supported by suitable land and transport infrastructure; • other small retail tenants who have to compete with large retail giants • new bulky goods centres and existing retailers in the area Whilst the bulky goods sector has benefited from strong retail spending on household goods and DIY home improvements in recent years, an emerging concern has been the current weak NSW housing market and the interest rate increases. Over the past year, Sydney’s deteriorating housing market has been characterised by rising mortgagee sales, a decline in building approvals and a tight residential rental market at only 1.0 per cent vacancy. With high interest rates creating pressure on housing affordability, the bulky goods retail sector will continue to be challenged by the adverse effects of Sydney’s weak residential property market.
Development Pipeline Despite the weak residential property market development of new bulky goods centres over the next two years is high with over 163,000 square metres of retail space coming onto the market. Details of some developments are given in the table below. CENTRE
SUBURB
Highlands Homemaker Centre
MITTAGONG WETHERILL Greenway Supacenta PARK Borella Road Homemaker Centre Dubbo Homemaker Centre Outlet Centre Campbelltown Batemans Bay Lifestyle Centre Kotara Homemaker Centre
CONSTRUCTION TYPE
SPACE (SQM)
COMPLETE
New
12,000
Jun-08
New
35,790
Jul-08
ALBURY
New
23,812
Aug-08
DUBBO
New
24,574
Sep-08
CAMPBELLTOWN New
18,500
Dec-08
BATEMANS BAY
New
19,000
Sep-09
NEWCASTLE
New
30,000
Dec-09
Source: Reed Construction Data and various sources
Investment Sales The bulky goods sector has been relatively tightly held over the last year. One major transaction includes the purchase of Tweeds Heads Homemaker Centre by Brett Blundy’s BB Retail Capital for $30 million on an initial yield of 7.25 per cent. Charter Hall has acquired a portfolio of six warehouses from the Bunnings Group located in NSW, QLD, VIC and the ACT for a combined total of $127.6 million on an initial yield of 6.2 per cent. The bulky goods assets have been leased to Bunnings with a lease term of 12 years and rental growth of 3 per cent per annum. Two warehouses were purchased in NSW in the suburbs of Penrith (sold for $26.5 million) and Nowra (sold for $13.7 million).
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Preston Rowe Paterson December Quarter 2007
Bulky Goods Centre Leasing Market Two lease transactions was reported for the bulky goods complex The Trade Centre at Jamisontown – AGL Retail Energy renewed their occupancy of 306 square metres of space at a rental rate of $221.15/sqm for a term of 3 years; and Whitewood Warehouse established a new lease for 1,096 square metres at a rate of $100.36/sqm on a term of three years with the option to extend for five years. A number of new leases were established in GPT Group owned and managed Homemaker City Bankstown. Details of the leases are illustrated in the table below. LESSEE
AREA RENT/SQM (SQM)
TERM (YRS)
Get Down Furniture
$
298.46
601.0
5 1 yrly @ 5%
Decorug
$
438.22
251.0
One Stop Pine
$
302.66
642.0
5 1 yrly @ 4% 5 1 yrly @ 4%
Fantastic Furniture
$
266.12
1,520.0
Sleepys's
$
416.76
216.1
5+5 1 yrly @ 3% 5 1 yrly @ 3%
Superfurn
$
376.21
399.0
5+3 1 yrly @ 5%
World of Beds
$
404.83
395.0
Retravision
$
281.20
1,285.0
Bing Lee
$
292.96
1,938.0
n/a 1 yrly @ 3% 5+5 1 yrly @ 3% 5 1 yrly @ 3.5%
Solomons Floorings
$
241.69
290.0
5 1 yrly @ 5%
Freedom Furniture
$
267.64
2,646.0
AB Furniture
$
384.15
455.0
n/a 1 yrly @ 3% 5 1 yrly @ 4%
Sleeping Giant
$
365.85
520.0
Contours Express Fitness
$
257.98
415.4
Yeah Modern Furniture
$
66.12
605.0
Hidden Treasure Café
$
348.18
48.3
5 1 yrly @ 3% 5 1 yrly @ 5%
Hungry Jacks
$
231.60
883.0
5+5 1 yrly @ 3%
REVIEW BASIS
5 1 yrly @ 4% 5 1 yrly @ 3%
Source: Commercial Property Monitor
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Preston Rowe Paterson December Quarter 2007
PRP Research Division
Preston Rowe Paterson NSW Pty Limited
At Preston Rowe Paterson, we pride ourselves on the research which we prepare in the market sectors within which we operate. These include Commercial, Retail, Industrial, Hotel & Leisure and Residential.
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We also provide comprehensive and integrated property consultancy service through our team of Real Estate Valuers, Property Investment Consultants, Listed Fund Syndicate Advisors, the Plant & Machinery Valuation division and our Property & Asset Management division. Preston Rowe Paterson continues to grow and expand it’s services globally through our relationship with King Sturge in the United Kingdom and Asia Pacific; Corporate Facilities (CORFAC) in the United States of America and PRP in New Zealand. Preston Rowe Paterson acts for an array of clients with all types of real estate, plant, machinery and equipment interests such as: • • • • • • • • • • •
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Directors Gregory J. Preston B.Com., Ass.Dip.Val., FAPI Mobile: 0408 622 400 Email: [email protected] Gregory C. Rowe B.Bus., FAPI (Plant + Machinery) Mobile: 0411 191 179 Email: [email protected]
Our Services include: • • •
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tion Allows clients to input instructions to one website and have that instruction routed to the appropriate valuation firm that covers that geographic area Allows clients to track via visual cues the progress of any valuation in Australasia For the first time provides a mechanism to allow clients to be proactive in the provision of further information to assist in the valuation process Is assisting in the battle on greenhouse by reducing the level of paper and other consumables required as all information once
New Zealand Office Auckland Phone: +64 9 921 5140 Powered By:
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The information within this research report should be regarded solely as a general guide. We believe that the information herein is accurate however no warranty of accuracy or reliability is given in relation to any advice or information contained in this publication and nor any responsibility for any loss or damage whatsoever arising in any way for any representation, act or omission, whether express or implied (including responsibility to any person or entity by reason of negligence) is accepted by Preston Rowe Paterson Australasia Pty Ltd or Preston Rowe Paterson NSW Pty Ltd or any of its associated offices or any officer, agent or employee of Preston Rowe Paterson Australasia Pty Ltd or Preston Rowe Paterson NSW Pty Ltd.
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Preston Rowe Paterson NSW Pty Limited A.B.N 61 003 139 188 Level 11, 80 Clarence Street, Sydney, NSW 2000 Phone: +61 2 9292 7400 Fax: +61 2 9292 7404 Email: [email protected] Web: www.prpaustralia.com.au
Sydney Retail Market Report December Quarter 2007
Directors Gregory J. Preston B.Com., Ass.Dip.Val., FAPI Mobile: 0408 622 400 Email: [email protected] Gregory C. Rowe B.Bus., FAPI (Plant + Machinery) Mobile: 0411 191 179 Email: [email protected]
www.prpaustralia.com.au
Corporate Property Services Real Estate Valuers Plant & Machinery Valuers Property and Asset Managers Property Investment Consultants Property Development Consultants Research Analysts Listed Fund and Syndicate Advisers
Australian Offices Adelaide Phone: + 61 9292 7400 Ballarat Phone: + 61 3 5334 4441 Brisbane Phone: + 61 7 3846 2822 Canberra Phone: + 61 2 6257 7112 Central Coast & Hunter Phone: + 61 2 4324 0355 Gippsland Phone: + 61 3 5672 4422 Gold Coast Phone: + 61 7 5574 2599 Melbourne Phone: + 61 3 9602 1333 Mornington Phone: + 61 3 5975 0480 Perth Phone: + 61 8 9221 1188 Sydney Phone: + 61 2 9292 7400
Preston Rowe Paterson are actively involved in valuation and consultancy relating to various forms of retail property. These include strip retail shops, bulky goods retail centres, neighbourhood and regional shopping centres and theme shopping centres, including theatres and the like. We also act for national retailers in preparing capital valuations for acquisition and disposal purposes and also rental valuations for leased premises. Set out herein is our quarterly research report, which considers the New South Wales retail property markets including matters such as sales, leasing and development activities.
INSIDE THIS ISSUE: Retail Indicators
2
City Centre
4
Super Regional Centre
5
Major Regional Centre
6
Regional Centre
8
Sub-Regional Centre
In addition to carrying out valuations and consulting in the retail sector, we also undertake retail property and asset management on behalf of clients.
9
Neighbourhood Centre
10
Bulky Goods Centre
12
About Preston Rowe Paterson
14
New Zealand Office Auckland Phone: +64 9 921 5140 Powered By:
Please contact either Greg Preston or Greg Rowe if you have any retail valuation or asset management requirements. Please note: that whist we endeavour to use the latest data available some figures may not incorporate the effects of recent interest rate rises, effects of the stock market crash and the continuing sub-prime credit crisis in the US. We expect some graphs to trend downwards as updated data becomes available.
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Preston Rowe Paterson December Quarter 2007
Retail Indicators
Retail Indicators
Retail Turnover $million
0.5
6200.0 0 6100.0 -0.5
6000.0
-1
5900.0 5800.0
-1.5
5700.0
-2 Dec-2007
Nov-2007
Oct-2007
Sep-2007
Aug-2007
Jul-2007
Jun-2007
May-2007
Apr-2007
December 2006 to December 2007 Total Retail Turnover ($ million)
Total Retail Sector % Change
Source: PRP Research/ ABS 8501.0 Retail Trade
NSW Retail Turnover by Industry Group December 2007 Hospitality & Services Industries $1191.6m
Food $2455.9m
Other Retailing $535.5m
Recreational Goods $221.0m Department Stores $460.0m Household Goods $841.4m
Clothing & Soft Goods $405.4m
Source: PRP Research/ ABS 8501.0 Retail Trade
Retail Spending and Consumer Sentiment 130.0
20,500
120.0
19,500
100.0
90.0
19,000
80.0 18,500 70.0
18,000 Dec-2007
Nov-2007
Oct-2007
Sep-2007
Aug-2007
Jul-2007
Jun-2007
May-2007
Apr-2007
Mar-2007
Feb-2007
Jan-2007
The second interest rate rise in November also saw the consumer sentiment index decline by 4.2 per cent to 110.5 November 2007, down from 115.3 in October 2007.
Retail Spending ($ million)
20,000 110.0
60.0
The impact of the first August interest rate rise did not adversely impact retail trade as shown by a slight increase in retail spending as Australian retail trade (current prices) rose by 0.8 per cent in August and 0.8 per cent in September to approximately $19.7 billion and $19.861 billion respectively. However, the consumer sentiment index fell 8.1 per cent to 111.1 in August, down from 120.8 in July.
Quarterly Percentage Change (%)
1
6300.0
Mar-2007
In December 2007, approximately $20.131 billion was spent on retail trade, up by 0.4 per cent over the month.
1.5
6400.0
Feb-2007
Retail Spending & Consumer Sentiment The volume of retail spending from Australian shoppers over the course of 2007 appeared to have displayed some resilience to the two interest rate rises, in August and November, as retail spending increased by an average 0.6 per cent per month.
2
6500.0
Jan-2007
The Other Retailing sector emerged with the highest annual growth in sales turnover over the year outperforming all other retail sectors with an increase of 14.8 per cent to $630.8 million.
6600.0
Dec-2006
The second graph on the right shows the breakdown of the Retail turnover by industry group. Much of the turnover in the state’s retail market is largely contributed by the Household Good Retailing sector and also the Recreational Good Retailing sector, increasing by 3.39 per cent and 2.02 per cent over the month to $630.8 million and $929.4 million respectively.
NSW Retail Turnover (2007)
Westpac-Melb Institute Consumer Sentiment Index
Retail Turnover The graph on the top right shows the total sales turnover for the retail sector in NSW over 2007. Over the analysed period the total sales turnover has trended upwards. Total sales turnover for the retail sector in NSW increased by 8.2 per cent over the year to December 2007 to $6,534.1 million, also reflecting a slight 0.5 per cent increase from the previous month of November 2007.
January 2006 to December 2006 Westpac-Melb Institute Consumer Sentiment Index
Retail Spending ($ million)
Source: PRP Research/ RBA Bulletin
Whilst the two interest rate rises have been blamed for the subsequent falls in consumer sentiment, the Australian retail market still appeared resilient.
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By the end of December 2007, consumer sentiment increased by 1.8 per cent.
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Preston Rowe Paterson December Quarter 2007
Retail Indicators
After the first interest rate increase in August 2007, the number of new motor vehicle sales in NSW declined by 1.1 per cent over the month to 26,558 in seasonally adjusted terms.
New Motor Vehicle Sales in NSW 28,000 Number of New Motor Vehicle Sales
Motor Vehicle Sales Retail demand for new motor vehicle sales appeared to experience marked fluctuations with a general trend upwards, mostly reflecting high oil prices and the increased interest rates.
27,000 26,000 25,000 24,000 23,000 22,000 Dec-07
Nov-07
Oct-07
Sep-07
Aug-07
Jul-07
Jun-07
May-07
Apr-07
Mar-07
Feb-07
Jan-07
Dec-06
Nov-06
Oct-06
Sep-06
Aug-06
Jul-06
Jun-06
May-06
Blacktown recorded the strongest population growth with a population increase of 1.8 per cent; a rise of 4,933 people. This was closely followed by Sydney LGA population growth increasing by 4,135 people.
Apr-06
December 2005 to December 2007
Source: PRP Research/ABS 9314.0 Sales of New Motor Vehicles
Economic Indicator Cash Rate 90 Bank Bill Rate 10 Year Bond Rate Consumer Price Index (all groups) Unemployment Rate Dwelling Approvals - Private sector (mthly) Non Residential approvals - Private sector (mthly) Westpac - Melbourne Institute Consumer Sentiment Index (Base 100)
Rate as at March 25 7.25% 7.77% 6.130% 160.1 4.1% n/a n/a
Rate 3 months prior 6.75% 7.24% 6.36% 160.1 4.4% 12,600 $1,841m
Rate 12 months prior 6.25% 6.53% 5.84% 158.6 4.5% 12,100 $2,195m
88.6
112.5
115.5
Source: PRP Research/ABS and RBA Bulletin
Areas which are characterised by high population growth will provide a supply of labour and also a source of demand for the shopping centres.
Strongest Population Growth Areas 2006 to 2007 5.0%
4.0%
3.0%
2.0%
% Change
The chart on the lower right displays the Local Government Areas (LGAs) across NSW which recorded the strongest population growth over the year to 2007.
Mar-06
Strong Population Growth Areas A major determinant of Australia’s retail property market has been factors relating to population growth and the distribution of the population.
Feb-06
Whilst motor vehicle sales have improved, concerns for rising crude oil prices and the global credit crisis, will continue to add to existing concerns for affordability in the motor vehicle retail market.
Jan-06
Dec-05
Latest available figures for December 2007 saw a slight decrease in the number of new motor vehicle sales falling by 0.2 per cent to 27,610.
1.0%
0.0%
Largest Growth Decline
-1.0%
-2.0%
-3.0% Blacktown (C)
Sydney (C)
Parramatta (C)
Auburn (A)
Bankstown (C)
Liverpool (C)
Baulkham Hills (A)
Holroyd (C)
Maitland (C) Moree Plains (A)
Local Government Area
Source: PRP Research/ABS 3218.0 Regional Population Growth
Also notably, Auburn LGA population increased by 4.2 per cent, rising by 2,882 people However, recent statistics have identified that the Moree Plains LGA experienced the state’s largest decline in population, down by 1.9 per cent reflecting the loss of 280 people. Powered By:
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Preston Rowe Paterson December Quarter 2007
City Centres
City Centre GLA > 1,000 sqm Within an arcade or mall development Promoted as an entity within a major Central Business District (CBD) Property Council of Australia • • •
There are currently 45 retail City Centre type shopping centres within the NSW market accounting for approximately 6.6 per cent of total retail gross lettable area (GLAR) (385,528 sqm).
The Sydney CBD retail market is the tightest on record as businesses compete for limited remaining space after the closure of Pitt Street Mall for redevelopment. The withdrawal of the retail space in the mall has pushed rents up with shops that had been charging $1,900 per square metre now pushing $3,000 per square metre. The outlook for the CBD is to remain tight for at least two years. The CBD vacancy rate fell to 1.3 per cent in December 2007 from an already tight 1.4 per cent in April 2007. The closure of the “super prime” Pitt Street Mall has made nearby retail zones attractive including the new Ivy complex in George Street and the Met centre. Before its closure, Pitt Street Mall was generating $6,350 per square metre and yields were between 4.75 per cent and 5.75 per cent. Prime locations in the Sydney CBD were on a yield of 4.75 per cent to 7.5 per cent in the final quarter of 2007, with rents of about $2,400 per square metre being charged. Secondary CBD site yields were 6.5 per cent to 8 per cent and rent was $1,359 per square metre. Given the high entry barriers such as finding suitable retail space and the extensive development approval process, freehold ownership for City Centre retail assets continue to be tightly held. The market is currently dominated by cashed up property funds such as Westfield, GPT, Thakral and Mirvac due to their ability to largely own, develop and manage shopping centres which have otherwise been difficult for smaller scale private investors.
Market Activity Development Pipeline It is understood that Bovis Lend Lease will develop the tower at the Mid City Centre redevelopment which is scheduled for completion in 2010 whilst leasing and management will be administered by Lend Lease Retail.
The City CBD retail market will also see construction works begin for Westfield’s controversial $600 million Pitt Street mall development which plans to increase the current 31,000 square metres gross lettable area to 38,000 square metres. With limited available retail space, the market has seen many existing retail asset owners undertake redevelopment and refurbishment activities as they take advantage of the value-added opportunities to maximise rental income and asset value. A summary of other construction projects are detailed in the table below. CENTRE Queen Victoria Building
SUBURB
CONSTRUCTION TYPE
SYDNEY
Extension
The Esplande
TERRIGAL New
SPACE (SQM) COMPLETE 5,300
Dec-08
4,666
Dec-09
Source: Reed Construction Data and various sources
Investment Sales In February 2007, The Australian Prime Property Fund emerged with the purchase of a 25 per cent stake in Sydney’s Mid City Centre for $70 million. The site is currently under construction and will comprise 55 shops with a 30 level office tower on top due for completion in 2010. In April 2007, the GPT Group launched their $2 billion shopping centre fund. GPT received cash proceeds of $1.2 billion in March 2007 as consideration for the sell down of its interest in the Fund (currently 40 per cent of the Fund). Through this holding the GPT Wholesale Shopping Centre Fund sold the Wollongong Central shopping centre to GPT group for $217.0 million. Leasing Market With the closure of the Mid City Centre (currently under construction) in Pitt Street Mall a number of neighbouring shopping areas have become popular including; The Ivy complex in George Street - has leased space to Mimco, Portmans, and Peter Alexander, and the Met Centre linking George Street and Wynyard train station - a number of fashion stores have moved in as well as chocolatier Max Brenner.
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Preston Rowe Paterson December Quarter 2007
Super Regional Centre
Super Regional Centre GLA > 85,000 sqm Two or more full line department stores One or more full line discount department stores Two supermarkets Approximately 250 specialty shops Property Council of Australia • • • • •
There are currently 8 Super Regional type shopping centres within the NSW market accounting for approximately 13.7 per cent of total GLAR (803,113 sqm)
The Super Regional shopping centres market continues to be dominated by the Westfield Group which accounts for over 50 per cent of the total gross lettable area.
Super Regional Shopping Centres Moving Annual Turnover Per Square Metre $9,000 $8,500
Moving Annual Turnover ($/sqm)
With high barriers to entry, Super Regional shopping centres have been tightly held and subject to major redevelopment activities underpinned by strategic actions to add value to existing assets.
$8,000 $7,500 $7,000 $6,500 $6,000 $5,500 $5,000 $4,500 $4,000 Erina Fair
Since its redevelopment, Westfield Parramatta now accommodates for an additional 70 new specialty shops, upgraded arcade and 200 new car spaces; still remaining the largest Super Regional Shopping Centre within the NSW market. The graph on the top right illustrates the moving annual turnover per square metre for all the super regional shopping centres for 2007. Westfield Parramatta recorded a 6.04 per cent rise in moving annual turnover (MAT) sales for the year to December 2007, reflecting a MAT rate of only $5,112/sqm. Despite being exposed to the highest pedestrian estimate of 22.3 million people (see second graph on the right), this figure was well below the average MAT rates recorded for all Super Regional Shopping centres in the NSW market at $6,411/sqm. The strongest performing Super Regional shopping centre in terms of moving annual turnover on a per square metre basis was Westfield Bondi Junction with a MAT of $8,801/sqm (up by 9.4 per cent from 2006). Other top performers included Warringah Mall with a MAT of $6,542/sqm.
Macquarie Centre
Warringah Mall Westfield Bondi Junction
Westfield Hornsby
Westfield Miranda
Westfield Parramatta
Super Regional Shopping Centre
Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007
Pedestrian Estimate - Super Regional Shopping Centres 25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0 Erina Fair
Macquarie Centre
Warringah Mall Westfield Bondi Junction
Westfield Hornsby
Westfield Miranda
Westfield Parramatta
Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007
Market Activity Investment Sales Super regional assets continue to remain tightly held over 2007 with only one reported major sales transaction. GIC Real Estate purchased a 50 per cent stake in Westfield Parramatta for $717.5 million reflecting a rate of $10,250/sqm.
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Preston Rowe Paterson December Quarter 2007
Major Regional Centre
Major Regional Centre 50,000 to 85,000 sqm GLA Extensive coverage of full range of retail needs Usually includes entertainment and leisure attractions Broad range of shopper facilities and amenities Property Council of Australia • • • •
There are currently 16 Major Regional type shopping centres within the NSW market accounting for approximately 18.4 per cent of total GLAR (1,080,485 sqm)
The graph on the right illustrates the moving annual turnover (MAT) per square metre and specialty sales per square metre for all the major regional shopping centres for 2007. Top performers in the NSW Major Regional type shopping centre market on a MAT per square metre basis were Westfield Penrith ($6,960/sqm) and Westfield Chatswood ($6,812/sqm).
Major Regional Shopping Centres Westfield Tuggerah Westfield Penrith Westfield Liverpool Westfield Hurstville Westfield Eastgardens Westfield Chatswood Westfield Burwood The Broadway Shopping Centre Macarthur Square Chatswood Chase Centro Roselands
00
00 3, 0
2, 0 $2
$2
00
00
00
00
1, 0 $2
0, 0 $2
00
00
00
00
00
9, 0 $1
8, 0 $1
7, 0 $1
6, 0 $1
5, 0 $1
00
3, 0
2, 0
4, 0 $1
$1
0
0
0
0
0
00 1, 0
$1
$1
0, 0
$1
,0 0 $9
,0 0 $8
,0 0
,0 0
$7
$6
0
0
0
0
,0 0 $5
,0 0 $4
,0 0
00
Moving Annual Turnover ($/sqm)
Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007
Centro Bankstown however, revealed a weaker performance on a moving annual turnover basis for both specialty stores ($8,615/sqm) and total shopping centre sales ($3,553/sqm).
Pedestrian Estimate - Major Regional Shopping Centres 20,000,000 17,500,000 15,000,000 12,500,000 10,000,000 7,500,000 5,000,000 2,500,000 Westfield Tuggerah
Westfield Penrith
Westfield Liverpool
Westfield Hurstville
Westfield Eastgardens
Westfield Chatswood
Westfield Burwood
The Broadway Shopping Centre
Macarthur Square
Chatswood Chase
0 Centro Bankstown
Also notably, Centro Roselands outperformed Westfield Tuggerah and Centro Bankstown on a MAT basis with a turnover of $4,295/sqm, despite having one of the lowest pedestrian estimates (see second graph on the right) of just over 8.1 million people and lower retail gross lettable area (GLAR) of 59,521 square metres. This is in comparison to a pedestrian estimate for Westfield Tuggerah and Centro Bankstown of 10.1 million people and 14 million people respectively and GLAR of 72,590 square metres and 77,666 square metres respectively.
$3
,0 0
,0 0 $2
$1
$/sqm Specialty Sales $/sqm
Centro Roselands
In the category for specialty sales, Chatswood Chase outperformed all other Major Regional shopping centres with a Specialty MAT of $21,804/sqm from its 140 specialty stores followed by Westfield Eastgardens with a specialty MAT of $20,241/sqm.
$-
Centro Bankstown
Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007
Market Activity Development Pipeline A vast majority of the Super Regional shopping centres have either recently completed extensive redevelopment works or still reconstructed along the development pipeline in the medium term. A summary of the construction projects for major regional shopping centre are detailed in the table on the right.
CONSTRUCTION TYPE
SPACE (SQM)
COMPLETE
CENTRE Centro Bankstown (stage 2)
SUBURB BANKSTOWN
Extension
4,032
Dec-08
Keira West Centre Chatswood Chase Centro Roselands
WOLLONGONG CHATSWOOD ROSELANDS
Extension Extension Extension
84,000 13,700 2,346
Dec-08 Jul-09 Dec-09
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Source: Reed Construction Data and various sources
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Preston Rowe Paterson Major Regional Centre Investment Sales Major Regional type shopping centres continue to be held tightly by retail giants Centro and Westfield over 2007 with only three reported major sales transactions from CFS Retail Trust, GPT Group, and DB RREEF CFS Retail Trust purchased a 50 per cent stake in the refurbished Chatswood Chase shopping centre for a reported value of $281.5 million. The building area is 49,450 square metre which equates to a building rate of $11,385 per square metre. The deal was transacted on an initial yield of 5.25 per cent substantially leased.
December Quarter 2007
50% stake in Chatswood Chase sold for $281.5 million
The other major sale was a 50 per cent stake in Macarthur Square by the GPT Wholesale Shopping Centre Fund to GPT Group for $205.75 million. The building area of Macarthur Square is 90,500 square metres which equates to a sale price of $4,547 per square metre. Like GPT Group, DB RREEF Trust established DB RREEF Wholesale Property Fund in 2007. The trust entered into a conditional contract in August 2007 with the fund to sell at book value 50 per cent of its interest in major regional centre Westfield Hurstville for $307.5 million. Leasing Market One lease transaction for major regional shopping centre was Di-Mensions leasing 47 square metres of space in Centro Bankstown at a rate of $572.40 per square metre on a lease term of 5 years with a rental increase of 4 per cent every year. This will give Centro an initial annual rental income of $26,903 per annum.
50% interest in Westfield Hurstville sold for $307.5 million
Another lease transaction involved Neami Ltd occupying 288 square metres of space at Westfield Eastgardens at a rate of $270.00 per square metre on a term of 3 years with the option to extend for another three years.
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Preston Rowe Paterson December Quarter 2007
Regional Centre
Regional Centre 30,000 sqm to 50,000 sqm Full line department store and full line department store One or more supermarkets 100 specialty shops Property Council of Australia • • • •
There are currently 15 Regional Centre type shopping centres within the NSW market accounting for approximately 9.8 per cent of total retail gross lettable area (576,571 sqm).
The worst performing regional shopping centre over 2007 was Campbelltown Mall with a MAT rate of $4,835/sqm and a pedestrian estimate of 4.7 million people (see second graph on the right).
$8,000 $7,500 $7,000 $6,500 $6,000 $5,500 $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 Westfield Warrawong
Westfield Mt Druitt
Westfield Kotara
Tweed City Shopping Centre
Stockland Wetherill Park
Stockland Shellharbour
Stockland Glendale
Stockland Forster
Stockland Bay Village
Park Beach Plaza
Charlestown Square
Lake Haven Shopping Centre
$2,000 Campbelltown Mall
Lake Haven shopping centre emerged as the leading Regional shopping centre with the highest moving annual turnover (MAT) per square metre of $8,126/sqm in 2007 (see top graph on the right), well above the average Regional centre MAT of $5,764/sqm.
Regional Shopping Centres 2006 Moving Annual Turnover Per Square Metre $8,500
Moving Annual Turnover ($/sqm)
The nature and scope of Regional type shopping centres in the NSW market is largely underpinned by a broad mix of investor demand from property funds such as Stockland and Westfield, syndicates and large scale purchasers who have suitable credentials.
Regional Shopping Centre
Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007 Pedestrian Estimate - Regional Shopping Centres 12,000,000 11,000,000 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000
Market Activity Development Pipeline Stockland and Shellharbour City Council have been working together to redevelop Stockland Shellharbour (pictured on the right). The $200 million plus refurbishment upon completion will add 30,000 square metres of retail space over 3,000 car spaces and provide consumers with a department store, three discount department stores, two supermarkets, and over 200 specialty shops.
5,000,000 4,000,000
Westfield Warrawong
Westfield Mt Druitt
Westfield Kotara
Tweed City Shopping Centre
Supa Factory Outlets Tuggerah
Stockland Wetherill Park
Stockland Shellharbour
Stockland Glendale
Stockland Bay Village
Park Beach Plaza
Lake Haven Shopping Centre
Charlestown Square
3,000,000 Campbelltown Mall
Despite having the smallest pedestrian estimate of 3.8 million, Stockland Glendale had a high MAT rate of $6,232/sqm – well above the average of $5,764/sqm.
Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007
Stockland Shellharbour
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Preston Rowe Paterson December Quarter 2007
Sub-Regional Centre
Sub - Regional Centre 10,000 to 30,000 sqm One full line discount department store Major supermarket Approximately 40 specialty shops Property Council of Australia • • • •
There are currently 82 Sub-Regional Centre type shopping centres within the NSW market accounting for approximately 24.2 of total retail gross lettable area (1,420,312 sqm)
A feature of the NSW Sub-Regional retail market is that rather than being dominated by one or two major property funds and syndicates, there is evidence of a diverse mix in owner types ranging from listed property trusts and syndicates to private investors/owner occupiers and superannuation funds such as ISPT.
Top City Ryde Development
Given the number of active retail players within the market, smaller investors will continue to compete with market-leading positioned players such as Stockland and Centro who aim to specialise in sub-regional shopping centres through their affluent acquisitions and developments.
Market Activity Development Pipeline Development activities remain strong, with one newly proposed shopping centre and other projects from redevelopments currently under construction. Further extension projects currently under construction are detailed in the table on the right and include Centro’s 8,700 square metre extension at Toormina Gardens Shopping Centre and a 17,536 square metre extension at Centro Lake Macquarie. The biggest project comes from the 78,215 square metre extension of the Top Ryde Shopping Centre where development work has commenced on the $1.1 billion town centre in Sydney’s north-western suburbs.
Artist's Impression
CENTRE Bonnyrigg Plaza Armidale Centre Toormina Gardens Shopping Centre Centro Lake Macquarie
SUBURB BONNYRIGG ARMIDALE
Gowrie Street Mall
TOORMINA
CONSTRUCTION TYPE
Extension New Extension
SPACE (SQM) COMPLETE 13,772 Mar-08 21,255 Mar-08 8,700
Nov-08
MOUNT HUTTON Extension
17,536
Dec-08
SINGLETON
10,500
Mar-09
Extension
Source: Reed Construction Data and various sources
The centre is on the corner of Devlin Street and Blaxland Road and will be called Top Ryde City. It will be four times as big as the existing 20,000 square metre mall and will include child care, a gym, multi-level parking, significant infrastructure improvements and pedestrian bridges.
Investment Sales Sub-regional assets appeared to be tightly held over 2007 with only one reported major sales transactions from GPT Group. The Group acquired Carlingford Court from their Wholesale Shopping Centre Fund for $192 million reflecting a rate of $5,801/sqm on the property’s purchase price.
The retail component is expected to be completed over three stages, with stage one opening before Christmas 2009.
Anchor tenants include Target (8,100 sqm), Woolworths (3,869 sqm), Coles (3,500 sqm) and 112 other specialty stores.
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Preston Rowe Paterson December Quarter 2007
Neighbourhood Centre
Neighbourhood Centre GLA less than 10,000 sqm Local shopping centre with supermarket Approximately 35 specialty stores Usually located in residential areas Property Council of Australia • • • •
There are currently 217 Neighbourhood type shopping centres within the NSW market accounting for approximately 17.0 per cent of total retail gross lettable area (998,203 sqm)
Investor demand within the neighbourhood shopping centres market is largely characterised by highly active institutional players such as both listed & unlisted funds including GPT Group, FKP Property Group, Becton and Unity Plus Investments and private syndicates.
The overall $360 million project will comprise a new railway station line for the new ChatswoodEpping Rail line; a new bus interchange; three residential towers comprising a total of five hundred apartments; and the new Metro Chatswood Shopping Centre.
Much of the competition has also been driven by increasing interests from private investors/owner occupiers who have emerged into the market over the year and accounting for a growing share of ownership in neighbourhood shopping centres.
The shopping centre located on Victoria Avenue in Chatswood will provide 11,500 square metres of retail space with the Precision Group controlling and managing the future leasing of the ongoing development.
The success of neighbourhood shopping centres and their ability to attract investors through rental income on long term leases has also been underpinned by giant supermarket tenants - Coles Group and Woolworths.
Metro Chatswood Development
With over 740 Coles and over 190 Bi-Lo supermarket stores across Australia and the trade area of Woolworth’s supermarkets increasing by 5.7 per cent in 2007, these supermarkets will have a significant ability to shape the retail landscape of Australia’s food and grocery sector within neighbourhood shopping centres. Retail trends such as one-stop shopping trips for everyday retail needs and food-based shopping trips have all highlighted the importance for neighbourhood shopping centres to provide a supermarket situated in a strategic location convenient for consumers in the local area.
Market Activity Development Pipeline Metro Chatswood The Precision Group has seized the opportunity to buy a new neighbourhood shopping centre to be named ‘Metro Chatswood’, following its completion at the end of 2008 for an agreed minimum price of $83 million. Metro Chatswood shopping centre is part of the Chatswood Transport Interchange development, one of the largest joint public-private infrastructure projects ever undertaken in Australia.
Artist's Impression
Stockland Cammeray Stockland has acquired the retail component of Cammeray Square, a new mixed use development on Sydney’s lower north shore, for approximately $42 million. Cammeray Square, which includes both residential and a retail component, is being developed by Hamptons Development Group and will include a total gross lettable area of approximately 5,000 square metres across four levels of retail space. Stockland will acquire the retail and retail parking levels on completion of the development in August 2008. The retail centre will be branded Stockland Cammeray and Stockland will undertake the leasing, tenancy design, marketing and delivery of the retial component. 10
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Neighbourhood Centre Some major neighbourhood centres currently under construction are summarised in the table on the right.
CENTRE SUBURB Northlakes Shopping Centre SAN REMO Chester Square Shopping Centre CHESTER HILL
Investment Sales Demand for neighbourhood shopping centres remained buoyant over the year with over 12 reported sales transactions totalling an estimated value in excess of $300 million.
Riverfront Plaza
KEMPSEY
Waterworth Drive Orange Metro Plaza Morisset Central Shopping Centre
As a result of limited supply levels and increasing demand from a broad spectrum of investors, yields have shown signs of compression. An indicative yield of around 6.78 per cent has been reflected from the number of sales transactions with yields ranging from 5.05 per cent to as high as 8.00 per cent which were achieved from the Norton Plaza Shopping centre sale ($112 million) and Maitland Marketplace ($4.3 million) respectively. The most significant sale involved the Norton Plaza Shopping Centre in Leichhardt in October 2007 selling for $112 million. The 10,495 square metre centre is anchored by Coles and was transacted on an initial yield of 5.05 per cent fully leased. Other notable neighbourhood shopping centres sold in 2007 included Forestway Shopping Centre ($78.1 million), Illawong Village ($30 million), Kareela Shopping Centre ($22.6 million) and East Mall Shopping Centre ($16.150 million). Details of the highest sales transaction for neighbourhood shopping centres for 2007 are included in the table below.
CONSTRUCTION TYPE
SPACE (SQM)
COMPLETE
New
4,750
May-08
Extension
7,900
Jun-08
New
6,279
Jul-08
MOUNT ANNAN
New
4,650
Jul-08
ORANGE
Extension
1,342
Sep-08
MORISSET
New
8,576
Dec-08
Source: Reed Construction Data and various sources
Leasing Market The Precision Group has secured Woolworths to anchor its new Metro Chatswood shopping centre. Woolworths has committed to a 2,700 square metres supermarket on a 20 year lease with options. The new supermarket will be located directly opposite the entrance to the new Chatswood Railway Station. Precision acquired the vacant office building adjoining the Metro Chatswood site from Sydney Water Corporation for $14.1 million. The company has secured development approval to convert the ground floor of the office building into the Woolworths tenancy and integrate it with the Metro Shopping Centre. Other leases established occurred at Eastwood Village Square – A Photographic shop was leased to Jin Lin Yang at a rate of $1,055.45/sqm over 44 square metres for a term of 4 years with the option to extend for another 4 years; Sunny Roy Ltd leased 105 square metres at a rental rate of $784.57/sqm on a term of 3 years with an option to extend for 3 years. Go-Lo has leased 536.2 square metres at Southpoint Shopping Centre in Hillsdale at a rate of $173.22/sqm. Three stores underwent rent reviews at Miller Shopping Centre which are detailed in the table below. AREA RENT/SQM (SQM)
LESSEE
Sold for $112 million
Sold for $78.1 million
Franklins
$
155.52
1,543.8
Woolworths Limted
$
109.97
3,551.0
Mitre 10
$
181.33
925.0
Source: Commercial Property Monitor
SALES MONTH
BLG BLG AREA RATE/SQM
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PROPERTY
SUBURB
QUALITY
SALE PRICE
Norton Plaza Shopping Centre
LEICHHARDT
Modern
$ 112,000,000
Oct-07
Forestway Shopping Centre
FRENCHS FOREST Secondhand
$
78,100,000
Apr-07
9,600
$
8,135
Illawong Village Shopping Centre
ILLAWONG
Refurbished
$
30,000,000
Apr-07
6,600
$
4,545
7.25%
Kareela Shopping Centre
KAREELA
Secondhand
$
22,600,000
Jun-07
4,152
$
5,443
6.12%
East Mall Shopping Centre
ARMIDALE
Secondhand
$
16,150,000
Oct-07
5,562
$
2,904
7.99%
Boambee Central Shopping Centre
COFFS HARBOUR
Secondhand
$
10,950,000
Feb-07
8,046
$
1,361
6.46% 11
Source: Commercial Property Monitor
10,495 $
5,801
YIELD 5.05%
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Preston Rowe Paterson December Quarter 2007
Bulky Goods Centre
Bulky Goods Centre GLA greater than 5,000 sqm Dominated by bulky goods retailers (furniture, white goods and other home wares) Located adjacent to large regional centre or in non-traditional retail locations Property Council of Australia • • •
There are currently 27 Bulky Goods type shopping centres within the NSW market accounting for approximately 9.1 per cent of total retail gross lettable area (535,947 sqm)
Market Activity As one of the fastest growing retail sectors, Australia’s bulky goods retail sector has successfully established itself as a major part of Australia’s retail landscape. Major property trusts/funds, including large retailers themselves have been able to capitalise the success of the bulky goods industry through their developments, redevelopments and acquisitions. The highly competitive environment for the bulky goods sector has been largely characterised by competing interests between: • major funds/syndicates and investors to attract quality anchor tenants; • developers and retailers in finding suitable site and land opportunities supported by suitable land and transport infrastructure; • other small retail tenants who have to compete with large retail giants • new bulky goods centres and existing retailers in the area Whilst the bulky goods sector has benefited from strong retail spending on household goods and DIY home improvements in recent years, an emerging concern has been the current weak NSW housing market and the interest rate increases. Over the past year, Sydney’s deteriorating housing market has been characterised by rising mortgagee sales, a decline in building approvals and a tight residential rental market at only 1.0 per cent vacancy. With high interest rates creating pressure on housing affordability, the bulky goods retail sector will continue to be challenged by the adverse effects of Sydney’s weak residential property market.
Development Pipeline Despite the weak residential property market development of new bulky goods centres over the next two years is high with over 163,000 square metres of retail space coming onto the market. Details of some developments are given in the table below. CENTRE
SUBURB
Highlands Homemaker Centre
MITTAGONG WETHERILL Greenway Supacenta PARK Borella Road Homemaker Centre Dubbo Homemaker Centre Outlet Centre Campbelltown Batemans Bay Lifestyle Centre Kotara Homemaker Centre
CONSTRUCTION TYPE
SPACE (SQM)
COMPLETE
New
12,000
Jun-08
New
35,790
Jul-08
ALBURY
New
23,812
Aug-08
DUBBO
New
24,574
Sep-08
CAMPBELLTOWN New
18,500
Dec-08
BATEMANS BAY
New
19,000
Sep-09
NEWCASTLE
New
30,000
Dec-09
Source: Reed Construction Data and various sources
Investment Sales The bulky goods sector has been relatively tightly held over the last year. One major transaction includes the purchase of Tweeds Heads Homemaker Centre by Brett Blundy’s BB Retail Capital for $30 million on an initial yield of 7.25 per cent. Charter Hall has acquired a portfolio of six warehouses from the Bunnings Group located in NSW, QLD, VIC and the ACT for a combined total of $127.6 million on an initial yield of 6.2 per cent. The bulky goods assets have been leased to Bunnings with a lease term of 12 years and rental growth of 3 per cent per annum. Two warehouses were purchased in NSW in the suburbs of Penrith (sold for $26.5 million) and Nowra (sold for $13.7 million).
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Preston Rowe Paterson December Quarter 2007
Bulky Goods Centre Leasing Market Two lease transactions was reported for the bulky goods complex The Trade Centre at Jamisontown – AGL Retail Energy renewed their occupancy of 306 square metres of space at a rental rate of $221.15/sqm for a term of 3 years; and Whitewood Warehouse established a new lease for 1,096 square metres at a rate of $100.36/sqm on a term of three years with the option to extend for five years. A number of new leases were established in GPT Group owned and managed Homemaker City Bankstown. Details of the leases are illustrated in the table below. LESSEE
AREA RENT/SQM (SQM)
TERM (YRS)
Get Down Furniture
$
298.46
601.0
5 1 yrly @ 5%
Decorug
$
438.22
251.0
One Stop Pine
$
302.66
642.0
5 1 yrly @ 4% 5 1 yrly @ 4%
Fantastic Furniture
$
266.12
1,520.0
Sleepys's
$
416.76
216.1
5+5 1 yrly @ 3% 5 1 yrly @ 3%
Superfurn
$
376.21
399.0
5+3 1 yrly @ 5%
World of Beds
$
404.83
395.0
Retravision
$
281.20
1,285.0
Bing Lee
$
292.96
1,938.0
n/a 1 yrly @ 3% 5+5 1 yrly @ 3% 5 1 yrly @ 3.5%
Solomons Floorings
$
241.69
290.0
5 1 yrly @ 5%
Freedom Furniture
$
267.64
2,646.0
AB Furniture
$
384.15
455.0
n/a 1 yrly @ 3% 5 1 yrly @ 4%
Sleeping Giant
$
365.85
520.0
Contours Express Fitness
$
257.98
415.4
Yeah Modern Furniture
$
66.12
605.0
Hidden Treasure Café
$
348.18
48.3
5 1 yrly @ 3% 5 1 yrly @ 5%
Hungry Jacks
$
231.60
883.0
5+5 1 yrly @ 3%
REVIEW BASIS
5 1 yrly @ 4% 5 1 yrly @ 3%
Source: Commercial Property Monitor
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Preston Rowe Paterson December Quarter 2007
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