Freestanding supermarket and liquor stores have for many years been the darling of retail investment sector and this trend looks set to continue off the back of strong supermarket and food sales. Woolworths Orange in NSW has demonstrated that retail remains ripe for private investor investment – transacting for $19.5 million at a yield of 5.6%.
Woolworths Orange is a purpose built modern single level full line freestanding supermarket, surrounded by convenient on-grade car parking in front of the property and complementary surrounding developments occupied by retailers such as Harris Farm, Chemist Warehouse and other high street tenants.
According to Steven Lerche, National Director, Retail Investments at Savills Australia, who negotiated the sale alongside colleague Andrew Palmer, “This assets class remains a highly sought after sector of the Australian market with groups bulking up on ‘Essential Services’ and ‘Daily Needs.’
“In the last three years, some 38 freestanding Coles and Woolworths supermarkets have sold, but only three of those sold in 2020. This recent sale of Woolworths Orange reaffirms that non-discretionary retail continues to ‘hit the spot’ and other sales this year have been in regional towns including Woolworths Lithgow, which sold for $14.65 million on a 5.49% yield and Woolworths Wadalba which sold for $26.15 million on a 5.7% yield” he said.
According to Andrew Palmer, Associate Director, Retail Investments at Savills Australia, freestanding supermarket yields over this three year period have ranged between 2.57% to 6.25% and the average is tightening due to the willingness to accept lower returns.
“It is expected this trend is likely to continue into 2021 with groups eagerly looking for long term security and cash flow” he continued.
The property benefits from a prominent and enviable location in the heart of Orange, a major regional city in the central west region of NSW, some 254kms west of Sydney. The property sits on an approximate site of 3,113m2 and features a rare net lease to Woolworths Limited, expiring August 2034 with two option terms of five years.
Lerche said despite the effect of Covid -19 across the country, strong NSW regional towns such as Orange, Dubbo, Wagga, Tamworth, Bathurst have all prospered and will further benefit from local tourism whilst international border are shut.
“Orange CBD has also seen the transformation of the Orange City Centre that underwent a redevelopment, following the exodus of Myer, to create a new and exciting retail environment which accommodates a new food court, a mini-major and a range of specialty shops.” said Lerche.
Two more freestanding supermarkets are currently in the market Woolworths Torquay and Coffs Harbour and likely to transact soon.