'Strong appetite': buyers of strip shops seem unfazed by Melbourne's fourth lockdown
When the possibility of Melbourne going into its fourth lockdown loomed, commercial agency Fitzroys briefly considered cancelling its two auctions of strip retail shops set for the day before the unthinkable might happen and the day after it did.
But then they decided to carry on regardless. “We felt there was still a strong appetite in the market for strip centres in Melbourne,” said David Bourke, Fitzroys director and auctioneer. “We knew demand would be good.
“So, we ended up conducting our first auction, on the Thursday before lockdown with all the right social distancing and hygiene measures, and then the second one, on the Friday that lockdown started, online.”
The company is now very glad they viewed the potential so optimistically. The auction on May 27, of 13 Church Street, Brighton, with a long lease to the Oroton Group, fetched $6.07 million at a tight 2.5 per cent yield. The owner had actually built the building, and held it for 60 years.
Agent Mark Talbot was one of the agents to handle the sale on Church Street – perennially the street with the lowest vacancy rates out of all Melbourne’s shopping strips, according to Fitzroys’ Walk the Strip report series.
“This was a genuine generational chance to secure a retail investment in the absolute prime of a blue-ribbon shopping strip,” said Mr Talbot.
“The prime of Church Street, Brighton, may be the most secure location in Australia to buy a commercial property asset.
“This is reflected in the yield being one of the tightest achieved in a Melbourne shopping strip asset in recent years.”
Then, the next day, an online auction was staged for the next big retail property, 634 Burke Road, Camberwell, home to national retailer Mecca Cosmetica, with a massage business to the rear. With another frontage to Market Place, it was on a 250-square-metre landholding, close to the market car park and Camberwell Central, with Woolworths and Kmart.
Mr Bourke conducted proceeding from home, while nine active bidders joined in via video link from Melbourne, regional Australia, Queensland and Hong Kong.
The property sold for $6 million, $1.4 million over the reserve, at a 3.58 per cent yield, much to the delight of the vendor, who’d owned the site for 46 years.
“Bricks-and-mortar assets with secure leases to quality tenants, which are well-located in Melbourne’s suburban shopping strips, have become more highly sought-after during the COVID-19 period and in the ultra-low interest rate environment,” Mr Bourke said.
“Australia has copped a bit of flak in terms of our vaccination rate, but it seems people still love to go to retail shopping strips in good local areas. They’re so accessible rather than driving out to major shopping centres. And our digital systems for online auctions are now very sophisticated.”
Alex Brierley, of CBRE Melbourne, has also found that Melbourne’s quality retail strips are performing solidly in the market. He’s currently selling 423 and 425 Elizabeth Street, Melbourne, two side-by-side, double-storey freehold retail buildings, for the first time in 45 years, with interest around the $12 million mark.
“We’re seeing strong demand for prime retail, particularly in the core retail strips of Swanston Street, Elizabeth Street, Church Street, in Brighton, and Burke Road, Camberwell,” Mr Brierley said. “I think it’s very much driven by low interest rates and a lot of investors looking for a secure place to store their money.
“That’s not being affected by the pandemic and lockdown at all. These buyers are taking a long-term view. They know there are challenges in the retail space, especially in food and beverage and hospitality, but they’re not looking for 12 months or two years, they’re looking long-term.”
Melbourne was currently also in the midst of generational change too, he says, where people who bought property in the 1950s and 1960s are now estate-planning and selling properties in order to divide the proceeds between children and grandchildren.
Two stores at 189 and 191 Glenferrie Road, Malvern, with a price guide of $6 million, are a good example of that. The matriarch of the owners’ family died and the members decided to dissolve the estate, sell the building and divide the proceeds.
“They’re now selling two wonderful shops, one taken up by Solomon Lew for one of his businesses and the other is the well-established food business Remy Bar de Tapas y Vino, with an office and an education business upstairs,” said MMJ Real Estate Melbourne agent Joel Wald, who’s also selling another retail property at 362-264 Little Bourke Street.
“There is generational change at play at the moment, but often you find a family sells and another member of the same family buys. People like this kind of investment.
“People love strip shopping and particularly at times of COVID when it’s nicer to be out in the fresh air than within an enclosed shopping centre.”
