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Surge in neighbourhood shopping centre sales

This article originally appeared in Australian Financial Review

The volume of neighbourhood shopping centre sales in NSW has jumped 80 per cent in the year to June 30 as cheap finance and hungry investors compete for well-leased retail with and strong incomes.

While the number of sales has increased dramatically, the value of total sales has also shown a sharp increase of 23 per cent.

Colliers International’s director of retail investment services James Wilson said NSW had seen an emergence of new purchasers over the past 12 months, with the most notable examples being RAM and Panthera Property Group.

“RAM’s activity presents a significant change in the competitive landscape for NSW Neighbourhood shopping centres, highlighting the appetite from offshore capital to invest in the resilient neighbourhood shopping centre sector by focusing on the underlying performance of the asset,” Mr Wilson said.

During the year Mr Wilson negotiated the record sale of Coles Five Dock in Sydney for $19.66 million at a yield of 4.89 per cent, beating the previous NSW record set by the sale of the Woolworths supermarket at Casula in Sydney’s west in 2015 on a net yield of 5.11 per cent.

There have been strong sale since and new groups such as RAM and Panthera have been leading the bidding. Before July last year neither RAM or Panthera Property Group had purchased a single shopping centre in NSW, but as of June 30 this year, both groups had acquired a combined $200 million worth of NSW shopping centres.

RAM acquired over $130 million worth of centres including the Sentinel neighbourhood portfolio for $44.5 as well as The Broadway Plaza in Punchbowl, Sydney for $41.2 million.

RAM Head of Real Estate Will Gray said the group would continue to seek assets in this sector of the market.

“RAM will continue to target non-discretionary backed retail assets that align with our refined defensive shopping centre acquisition strategy,” Mr Gray said.

“We find the risk return metrics to be appropriate for our investors. Whilst we have acquired a metropolitan Sydney centre we continue to see value in certain regional NSW catchments, so we tend to be not as contained on geography as some other groups are.”