Industrial trumps retail as rate hikes hit commercial auctions
Rising borrowing costs hit the wallets of private investors at a portfolio auction in Sydney on Tuesday as clearance rates crashed to 50 per cent despite many of the retail properties on offer coming with long leases to Woolworths.
After achieving a 96 per cent clearance rate at the end of October across two portfolio auctions in Sydney and Melbourne, just 11 out of 22 properties offered in Sydney on Tuesday by agents Burgess Rawson sold under the hammer of auctioneer David Scholes of Auctionworks.
Expectations of another 25 basis points rate hike by the Reserve Bank, which was duly announced later in the day (taking the cash rate to a decade high of 3.1 per cent), resulted in lacklustre bidding, despite the best efforts of Mr Scholes.
Usually sought-after trophy assets such as a Woolworths supermarket in a regional NSW hub and a BWS-anchored retail property in Macquarie Fields were both passed in, while a small shopping centre in Kambah, Canberra failed to generate a single bid despite being offered fully leased and with most tenants on leases of between five and seven years.
Instead, investors showed greater confidence in industrial assets in mostly regional centres, after nine out of 13 cold storage and distribution facilities leased to Woolworths subsidiary PFD Foods sold under the hammer for a combined $12.3 million on yields ranging from 5 to 7.3 per cent.
All were offered for sale by ASX-listed fund manager Charter Hall and most came with leases running until either 2026 or 2031 and renewal options.
Sales included a PFD facility in Tingalpa in inner Brisbane – the only metro-based offering – which went for $2.67 million on a 5 per cent yield.
PFD facilities were also snapped up in Smithton (Tasmania), Mildura, Inverell and Griffith.
Another three more PFD warehouses that were passed in sold post-auction, according to a Charter Hall spokeswoman, taking total sales for the day to more than $14 million.
“Overall, the PFD Food Services portfolio has exceeded our book values,” the Charter Hall spokeswoman said.
“We have sold the smaller, non-core assets that formed part of the original $270 million sale-and-leaseback portfolio of PFD, which we acquired in 2021.”
Other assets to sell under the hammer included a Wahroonga medical suite leased to ASX-listed Sonic Healthcare, which sold for $1.2 million on a 4.7 per cent yield and the Shellharbour office of disability employment services group AtWork which sold for $815,000 on a yield of 6.6 per cent.
However, one of the trophy offerings, a freestanding Woolworths supermarket in Cooma – a regional town in southern NSW that’s the main administrative hub for the Snow Hydro 2.0 renewable energy project – was passed in for $19.4 million despite being offered with a seven-year lease and being marketed as the “first standalone supermarket publicly offered in NSW in over 2 years” by Burgess Rawson.
The full-line supermarket including a BWS liquor store was offered for sale by Sydney’s Walsh family, who paid $15.5 million in 2019.
Another property underpinned by a Woolworths lease that failed to secure a buyer was a BWS-anchored freehold retail asset on Saywell Road in Macquarie Fields in Sydney’s south-west.
It was offered for sale by the Coptic Orthodox Church Property Trust, which paid $2.29 million in 2015.
Retail assets and childcare centres, which in previous Burgess Rawson portfolio auctions have been highly sought after, also failed to find buyers at Tuesday’s portfolio auction.
A two-storey restaurant on Victoria Road in Marrickville leased to popular Vietnamese eatery Bay Tinh until 2026 failed to sell under the hammer as did three TG’s Childcare centres in Wauchope on the NSW Mid North Coast, despite being offered with new 15-year leases and 100 occupancy rates.
