For the first time in seven years, the Elermore Shopping Centre in Elermore Vale, 9kms west of Newcastle has sold, with a private syndicate snapping up the neighbourhood centre for circa $18 million on a 6.8 per cent passing net yield.
The single level, enclosed and strong performing centre comprises a large Ritchies SUPA IGA supermarket supported by 17 non-discretionary specialty tenants, with 4,048sqm of gross lettable area on a 23,882sqm site including additional land ready for development, car parking for 235 vehicles and an estimated fully leased net income of circa $1.44million.
According to Steven Lerche, national director retail investments at Savills Australia who sold the asset with colleagues Andrew Palmer and Ben Nastasi, on behalf of Bamm Group, Newcastle is seeing a surge in investment activity, largely stimulated by the $6.55 billion State Government investment mandate which has brought to light the new light rail system on Hunter Street, the new transport interchange at Wickham, construction of the Newcastle City University Campus and much more.
“We are seeing a lot of investor interest come from the Sydney investment market and interstate markets such as Melbourne and Brisbane due to the significant growth prospects of Newcastle,” he said.
“Retail assets have been in particular favour with developers due to their strategic locations, large site area, existing income stream and potential to redevelop under the existing planning controls.
Lerche said an immediate development opportunity exists on two blocks of undeveloped land (4,382sqm) that has favourable B2 Local Centre Zoning.
“There is also further value-add opportunity through an expansion of the existing shopping centre (STCA) and future mixed use development upside” he said.
Newcastle is the largest regional economy in Australia and is the second most populated area in NSW.
According to Andrew Palmer, associate director retail investments at Savills, the median house price in Newcastle is $595,000 compared to approximately $1.17million in Sydney, based on Domain Group’s rental and house price report, and investors are taking notice.”
Palmer went on to say that it is interesting to note that a new State Custodians Galaxy Poll showed while a high proportion of Victorian investors (72 per cent) are still set on buying in Melbourne, almost half of NSW investors (49 per cent) are looking beyond the big smoke to invest their money.
“Elermore Vale and its surrounding suburbs are certainly set to reap the benefits of this surge in investor demand” he said.
Steven Lerche sold the Elermore Shopping Centre to Bamm Group in 2011 for $8.3m with Ben Nastasi acting on behalf of the purchaser. At the time, the property was anchored by BiLo on a short lease.
“The sale of Elermore Shopping Centre some six years ago was timely and enabled Bamm Group to more than double their capital with the sale of the property achieving a price of close to $18m,” said Nastasi, director, retail services, asset management at Savills.
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