Neighbourhood Shopping Centres Out of Favour With Investors

Well placed industry sources described investor reception as lacklustre for the Diamond Creek Shopping Station in Diamond Creek and the Olive Tree Shopping Centre in Lilydale, which were being marketed earlier this year.

Combined the properties were expected to sell for more than $30 million, on yields of around 7 per cent.

However, concerns about the direction the economy is headed has taken much of the mania out of last year’s private investor market, with speculation now that average yields will increase from between 6.25 and 7.25 per cent, to between 6.75 and 7.75 per cent per cent this quarter.

The Diamond Creek Shopping Station was expected to sell for about $20 million after a tender campaign last month, which would have reflected a yield of about 7 per cent.

Gross Waddell director Michael Gross, who was marketing the property, declined to comment on the quantity or quality of offers received, confirming only that the asset has been withdrawn from sale.

Meanwhile the Olive Tree Shopping Centre, opposite the Lilydale train station has been put up for sale privately, with a price tag of $11 million, reflecting a yield of about 7.5 per cent.

CB Richard Ellis selling agent Steven Lerche said the asset aroused investor interest, but that in the current environment, prospective buyers made offers equating to yields of close to 8 per cent (around $10.5 million)

All eyes turn now to the Yarra Valley Shopping Centre and adjoining Yarra Valley Office Centre on the corner of Maroondah Highway and Anderson Streets in central Lilydale. The asset returns $1.6 million in annual rent, and was expected to sell for about $23 million, reflecting a yield of about 7 per cent.

Pound Tyas Bernardi director Michael Pound who is selling the property with Pierre Bernardi said tenders closed for the shopping centre last Thursday, and that negotiations are underway with prospective purchasers. The asset is one of two shopping centres owned by private developer Deal Corporation.

According to Knight Frank research, retail yields have been steadily decreasing since early 2001, with yields for neighbourhood shopping centres ranging between 6.25 per cent and 7.25 per cent as at the December 2007 quarter.

Knight Frank associate director – research, Richard Jenkins says that although the market remains untested this year, investor sentiment seems to indicate that yields have now plateaud and are likely to ease over the short term.

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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of