Investment activity in the retail sector has been very strong, with more than $1.6 billion of retail assets changing hands in three months to June, a rise of almost 26 per cent year on year, according to Cushman & Wakefield.
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Alex Pham, national research manager, research and consultancy at Cushman & Wakefield, said investor demand remained strong for neighbourhood and subregional centres.
"Subregional centres dominated retail property transactions with more than $897 million transactions over the first six months of 2015, accounting for 36 per cent of total retail sales above $10 million," he said.
"This is followed by neighbourhood centres with over $737 million transactions, representing 30 per cent of total retail sales."
The largest neighbourhood transaction during the period was Pacific Square Shopping Centre, NSW, which Charter Hall bought from Clycut in an off-market transaction for $137 million at a yield of 6.6 per cent.
"The transaction highlights the group's focus on neighbourhood centres in the search for exposure to non-discretionary retail sales," Mr Pham said.
Among the other major sales was the Surry Hills Shopping Village (NSW) sold for $96 million by Ray White Commercial at a yield of 2.69 per cent.
The main anchor, Coles, has exercised its right to stay and plans to refurbish the supermarket. There are also suggestions that the site could yield about 200 apartments and 8000 square metres of additional retail space.
"This is an example of the high demand for retail assets with future development potential within established areas of metropolitan Sydney where greenfield opportunities are limited," Mr Pham said.
He said the demand for the assets comes as the low interest rate environment and rising wealth have boosted consumer spending in Australia in the first few months of 2015, particularly in discretionary spending.
Recent economic indicators have shown a healthy performance in the retail sector, with retail turnover in trend terms rising by 4.4 per cent in April 2015 compared with April 2014.
Another site on the market is in Tahmoor, being sold through Knight Frank, with a 10-year Weighted Average Lease Expiry (WALE).
The Tahmoor Shopping Village is on the corner of Remembrance Drive and Thirlmere Way and sits on 15,519 square metres, including expansion land and 4218qm of gross lettable area, split between two separate retail buildings. The centre is being offered in one line or with the expansion land to be sold separately. No price was disclosed, but similar properties have fetched more than $12 million.
Sales agents Ben Stewart and Andrew Palmer, of Knight Frank, said investors seeking assets with long-term WALE, strong lease covenants and value-added potential through further development would be attracted to Tahmoor Shopping Village.
Mr Stewart said demand for regional centres was on the rise as investors looked for growth potential in the catchment areas.
Mr Palmer said the centre benefited from long-term leases with fixed annual increases, a highly attractive investment feature, given the lack of rental growth offered by other national anchor tenants of similar shopping centres.
Tahmoor is in the region of Wollondilly, which is expected to triple its population within 30 years.
Mr Stewart said that last year the council approved $166.8 million of development applications around town centres.
The south-western region of Sydney will form part of the largest development in the country, with up to 1 million dwellings built by 2031.
