The Commonwealth of Australia has sold a strata retail investment located in Melbourne’s Oakleigh South for $1,851,000 with a local investor outbidding 14 other parties for the popular Oakleigh South Discount Chemist.
The result represents a yield of 4.08% highlighting the strong demand for quality retail assets despite the current environment.
Located at 1146-1148 North Road, the property was hotly contested, with more than 180 registered parties and 15 offers at the close of the marketing campaign.
The deal was negotiated by Julian Heatherich, Mark Stafford and Benson Zhou of Savills Australia who said all parties were drawn to the property due to its affordable price point, strong lease fundamentals and the essential service nature of the tenant.
According to Julian Heatherich, Director, CBD and Metropolitan Sales at Savills Australia, with numerous reports of market struggles, this result for a small strata retail in a suburban location sits comfortably within some of the best results for strata retail in the past 15 months.
“Well located and securely leased commercial investments continue to perform extremely well and attract significant interest” said Mr Heatherich.
“The Savills sales team has transacted more than $36.5 million in strata investments over this period throughout Melbourne, including sales in the CBD, North Melbourne, St Kilda, Balaclava, Essendon, Balwyn North and Mitcham last year, with yields from as low as 3.5%, and typically sitting around 4.50%”.
Those North Melbourne sales comprise the ground floor retail located at 19-35 Flemington Road, which was developed by Nicole Chow’s UAG group. The developer sold a number of small investments within the recently completed mixed use development in 2019, with those sales raking in more than $10 million with an average rate of more than $16,000 per square meter.
Further evidence of this strong appetite for high quality, well leased retail investments was highlighted by the sale of shops 2 & 3 308 Carlisle Street, Balaclava. Developed by prominent developer ‘Urban DC’, the two shops leased to ‘On the Juice – Nutrition Bar’ and ‘Cold Rock Ice Cream’ sold on 4.51% and 4.28% yields respectively.
“Ultimately, to deliver 15 offers for this asset in the current environment highlights the demand for well-located, high quality investment opportunities. We are now dealing with 14 under bidders who are keen to secure their next investment,” said Mr Heatherich.
Mark Stafford, Associate Director, CBD and Metropolitan Sales at Savills Australia commented that “Despite the often hyped headwinds within the retail market, this deal along with the interest the campaign generated and other recent transactions, highlights that there is a strong appetite from investors for prime investment opportunities.
“Buyers are continuing to look for high quality assets with long term leases to secure a return, as the record low interest rate climate continues to drive investors to look for new opportunities.”
Other recent strata retail transactions have continued to emphases this demand for commercial investment assets within the current market conditions in 2020. Earlier this year the team at Savills sold an ice cream shop in Essendon off-the-plan in an off market deal that reflected 5% yield, further highlighting the underlying demand for quality commercial investments.
Learn more about Savills Metropolitan & Regional Sales.