Fitzroys 2021 Outlook – Suburban Retail Investment

Posted on 02nd March 2021

More investors are expected to pursue well-located properties in Melbourne’s famous shopping strips in 2021, as income security moves further into focus.

While there is more supply expected to come to the market this year than in 2020, according to Fitzroys, the deeper pool of investors chasing high-quality assets is expected to keep prices elevated and maintain yields.

“Vendors can expect strong demand for well-located assets – those in the prime section of their shopping strips, and within established and growing catchments,” Fitzroys Director, Chris Kombi said.

“People have been reconnecting to their local communities. Their neighbourhood strips have been the place to go for a coffee, a catch-up, or to break up the day as working from home becomes more widely accepted.

“More businesses have taken note of this and are seeking suburban locations. This has enhanced the investment prospects of shopping strip assets.”

Reflecting this, several Fitzroys sales campaigns kicking off the new year are located in the prime section of popular shopping strips across Melbourne. Among those was the first auction of a primely-located asset in a shopping strip for 2021 which delivered a strong result.

Fitzroys’ David Bourke and Chris James sold the generational opportunity at 751-753 Burke Road, Camberwell for $7.55 million at a sharp 4.1% yield. The vendors were a family that had held the asset for 45 years.

The dominant two-level 420sqm freehold has an expansive 12.2m frontage to Burke Road, and is on a 465sqm Commercial 1-zoned site. Mountfords Shoes, part of national retailer Munro Footwear Group, has a long 6+5-year lease returning $329,600 per annum plus GST, with annual 3% increases.

“Well-located Melbourne retail and commercial property with strong tenancy profiles and long-term leases have become more highly-sought after during the COVID period, with investors preferring the secure income of bricks and mortar assets in the ultra-low interest rate environment.” Bourke said.

The campaign generated well over 100 enquiries from local and international parties.

“Investors and land bankers recognised the historic nature of this opportunity to acquire a dominant site in the heart of one of Melbourne’s most famous shopping and lifestyle strips. This was reflected in the high volume of enquiry, fierce competition between multiple bidders at auction, and the strong result achieved.

“We expect more investors will be seeking these types of opportunities in 2021. The depth of enquiry shows there is a large volume of capital out there waiting to be deployed, with pent- up demand resulting from few high-quality, well-located properties offered for sale over the past 12 months,” Bourke said.

At 400 Glen Huntly Road, Elsternwick, an absolute prime landholding of 277sqm in the emerging strip, with a recently renovated double-storey shop and dwelling, sold under the hammer through Talbot and James for $1.95 million. Multiple bidders competed for the property, which offers outstanding future value add or redevelopment potential.

Meanwhile, a versatile freehold in the heart of High Street, Northcote offers the chance to capitalise on the opportunities of the most densely-populated section within one of Melbourne’s most popular shopping and lifestyle strips. Ervin Niyaz and Kombi are handling enquiries at 461 High Street and the auction is this Friday at 1pm.

“Owners have recognised the demand that has built up over nearly 12 months for assets in the prime section of Melbourne’s shopping strips,” Kombi said.

Marketing has kicked off for a premier corner site in Carlisle Street, Balaclava. Zoned Commercial 1, the 273sqm site at 224 Carlisle Street is adjacent to Coles, opposite Woolworths and large council car park, close to train and tram routes, and surrounded by progressive and eclectic cafes, bars and retailers.

The opportunity to invest, occupy or develop in one of Melbourne's most sought-after lifestyle centres is offered through Talbot and Bourke via Expressions of Interest closing 24 March.

An EOI campaign closes that same day for a mixed-use Richmond building that presents a uniquely Melbourne COVID-proof investment, offering three inner-city home offices close to one of the most popular and accessible retail and lifestyle strips.

Bourke, Lewis Waddell and Shawn Luo are marketing 420-422 Church Street Richmond, which spans four titles and is to be offered in one line. Primely positioned in a coveted Richmond Hill location, just metres from Swan Street and in the heart of the Cremorne and Richmond activity zone, the fully-leased property comprises three separate three-level spacious home offices plus a ground floor commercial showroom, and returns $216,358 per annum.

Among other recent sales, Kombi also sold 690 Glenferrie Road, Hawthorn for $2.74 million to a private investor. Leased to a café, the two storey freehold is located in the prime trading section of the popular shopping strip.

Kombi negotiated the off-market deal on behalf of a family that had held the property for over 40 years. Taking place during Victoria’s Stage 4 lockdown, the sale achieved a sharp 3.7% yield.

The building is next door to McDonald’s, opposite Coles and moments away from Glenferrie Station and Swinburne University.

“This result, in the midst of a pandemic, further highlights that well-located retail property in traditionally strong shopping precincts will always be sought after by astute investors who are well aware of the limited buying opportunities in these proven pockets,” Kombi said.