Sydney Retail Dec Qtr 2007

8/14/2019 Sydney Retail Dec Qtr 2007

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Sydney RetailMarket Report

December Quarter 2007

PRESTON ROWEPATERSON

Preston Rowe Paterson are actively involved in valuation and consultancyrelating to various forms of retail property. These include strip retailshops, bulky goods retail centres, neighbourhood and regional shoppingcentres and theme shopping centres, including theatres and the like.

We also act for national retailers in preparing capital valuations for acqui-sition and disposal purposes and also rental valuations for leased prem-ises.

Set out herein is our quarterly research report, which considers the NewSouth Wales retail property markets including matters such as sales, leas-ing and development activities.

In addition to carrying out valuations and consulting in the retail sector,we also undertake retail property and asset management on behalf ofclients.

Please contact either Greg Preston or Greg Rowe if you have any retail

valuation or asset management requirements.

Please note: that whist we endeavour to use the latest data available some figures may notincorporate the effects of recent interest rate rises, effects of the stock market crash and thecontinuing sub-prime credit crisis in the US. We expect some graphs to trend downwards as

updated data becomes available.

www.prpaustralia.com.au

INSIDE THIS ISSUE:

Retail Indicators 2

City Centre 4

Super Regional Centre 5

Major Regional Centre 6

Regional Centre 8

Sub-Regional Centre 9

Neighbourhood Centre 10

About Preston Rowe Paterson 14

Bulky Goods Centre 12

Preston RowePaterson NSWPty Limited

A.B.N 61 003 139 188

Level 11,

80 Clarence Street,Sydney, NSW 2000

Phone: +61 2 9292 7400Fax: +61 2 9292 7404

Email:[email protected]

Web:www.prpaustralia.com.au

DirectorsGregory J. PrestonB.Com., Ass.Dip.Val., FAPI

Mobile: 0408 622 400Email:[email protected]

Gregory C. RoweB.Bus., FAPI

(Plant + Machinery)Mobile: 0411 191 179Email:

[email protected]

Corporate PropertyServicesReal Estate ValuersPlant & Machinery ValuersProperty and Asset ManagersProperty Investment Consult-antsProperty Development Con-sultants

Research AnalystsListed Fund and Syndicate

Advisers

Australian OfficesAdelaidePhone: + 61 9292 7400

BallaratPhone: + 61 3 5334 4441

BrisbanePhone: + 61 7 3846 2822

CanberraPhone: + 61 2 6257 7112

Central Coast & HunterPhone: + 61 2 4324 0355

GippslandPhone: + 61 3 5672 4422

Gold CoastPhone: + 61 7 5574 2599MelbournePhone: + 61 3 9602 1333

MorningtonPhone: + 61 3 5975 0480

PerthPhone: + 61 8 9221 1188

SydneyPhone: + 61 2 9292 7400

New Zealand OfficeAucklandPhone: +64 9 921 5140

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Preston Rowe Paterson


Retail IndicatorsRetail IndicatorsRetail TurnoverThe graph on the top right shows the total salesturnover for the retail sector in NSW over 2007.Over the analysed period the total sales turnoverhas trended upwards. Total sales turnover for theretail sector in NSW increased by 8.2 per centover the year to December 2007 to $6,534.1million, also reflecting a slight 0.5 per cent in-crease from the previous month of November2007.

The second graph on the right shows the break-down of the Retail turnover by industry group.Much of the turnover in the states retail marketis largely contributed by the Household GoodRetailing sector and also the Recreational GoodRetailing sector, increasing by 3.39 per cent and2.02 per cent over the month to $630.8 millionand $929.4 million respectively.

The Other Retailing sector emerged with thehighest annual growth in sales turnover over theyear outperforming all other retail sectors with anincrease of 14.8 per cent to $630.8 million.

Retail Spending & Consumer SentimentThe volume of retail spending from Australianshoppers over the course of 2007 appeared tohave displayed some resilience to the two inter-est rate rises, in August and November, as retailspending increased by an average 0.6 per centper month.

In December 2007, approximately $20.131 billionwas spent on retail trade, up by 0.4 per cent overthe month.

The impact of the first August interest rate risedid not adversely impact retail trade as shown bya slight increase in retail spending as Australianretail trade (current prices) rose by 0.8 per centin August and 0.8 per cent in September to ap-proximately $19.7 billion and $19.861 billion re-spectively. However, the consumer sentimentindex fell 8.1 per cent to 111.1 in August, downfrom 120.8 in July.

The second interest rate rise in November alsosaw the consumer sentiment index decline by 4.2per cent to 110.5 November 2007, down from115.3 in October 2007.

Retail Indicators

Source: PRP Research/ ABS 8501.0 Retail Trade

Whilst the two interest rate rises have beenblamed for the subsequent falls in consumersentiment, the Australian retail market still ap-peared resilient.

By the end of December 2007, consumer senti-ment increased by 1.8 per cent.

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Source: PRP Research/ RBA Bulletin

NSW Retail Turnover (2007)

5700.0

5800.0

5900.0

6000.0

6100.0

6200.0

6300.0

6400.0

6500.0

6600.0

Dec-2006

Jan-

2007

Feb-2007

Mar-2007

Apr-

2007

May

-2007

Jun-

2007

Jul-2007

Aug-2007

Sep-2007

Oct-

2007

Nov-2007

Dec-2007

December 2006 to December 2007

RetailTurnover$million

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

QuarterlyPercentageChange(%)

Total Retail Turnover ($ mil l ion) Total Retail Sector % Change

NSW Retail Turnover by Industry Group

December 2007

Other Retailing

$535.5m

Recreational Goods

$221.0m

Household Goods

$841.4mClothing & Soft Goods

$405.4m

Department Stores

$460.0m

Food

$2455.9m

Hospitality & Services

Industries

$1191.6m

Source: PRP Research/ ABS 8501.0 Retail Trade

Retail Spending and Consumer Sentiment

60.0

70.0

80.0

90.0

100.0

110.0

120.0

130.0

Jan-200

7

Feb-200

7

Mar-200

7

Apr-200

7

May-2007

Jun-200

7

Jul-2007

Aug-2007

Sep-200

7

Oct-200

7

Nov-2007

Dec-200

7

January 2006 to December 2006

Westpac-MelbInstituteConsumer

SentimentIndex

18,000

18,500

19,000

19,500

20,000

20,500

RetailSpending($million)

Westpac-Melb Institute Consumer Sentiment Index Retail Spending ($ million)


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Retail Indicators

Motor Vehicle SalesRetail demand for new motor vehicle sales ap-peared to experience marked fluctuations with ageneral trend upwards, mostly reflecting high oilprices and the increased interest rates.

After the first interest rate increase in August2007, the number of new motor vehicle sales inNSW declined by 1.1 per cent over the month to26,558 in seasonally adjusted terms.

Latest available figures for December 2007 saw a

slight decrease in the number of new motor vehi-cle sales falling by 0.2 per cent to 27,610.

Whilst motor vehicle sales have improved, con-cerns for rising crude oil prices and the globalcredit crisis, will continue to add to existing con-cerns for affordability in the motor vehicle retailmarket.

Strong Population Growth AreasA major determinant of Australias retail propertymarket has been factors relating to populationgrowth and the distribution of the population.

Areas which are characterised by high populationgrowth will provide a supply of labour and also asource of demand for the shopping centres.

The chart on the lower right displays the LocalGovernment Areas (LGAs) across NSW whichrecorded the strongest population growth overthe year to 2007.

Blacktown recorded the strongest populationgrowth with a population increase of 1.8 percent; a rise of 4,933 people. This was closelyfollowed by Sydney LGA population growth in-

creasing by 4,135 people.

Also notably, Auburn LGA population increasedby 4.2 per cent, rising by 2,882 people

However, recent statistics have identified that theMoree Plains LGA experienced the states largestdecline in population, down by 1.9 per cent re-flecting the loss of 280 people.

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Strongest Population Growth Areas 2006 to 2007

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Blacktown

(C)

Sydney (C) Parramatta

(C)

Auburn (A) Bankstown

(C)

Liverpool (C) Baulkham

Hills (A)

Holroyd (C) Maitland (C) Moree Plains

(A)

Local Government Area

%C

hange

Largest Growth

Decline

Source: PRP Research/ABS 3218.0 Regional Population Growth

New Motor Vehicle Sales in NSW

22,000

23,000

24,000

25,000

26,000

27,000

28,000

Dec-05

Jan-06

Feb-06

Mar-06

Apr-06

May-06

Jun-06

Jul-06

Aug-06

Sep-06

Oct-06

Nov-06

Dec-06

Jan-07

Feb-07

Mar-07

Apr-07

May-07

Jun-07

Jul-07

Aug-07

Sep-07

Oct-07

Nov-07

Dec-07

December 2005 to December 2007

NumberofNewMotorVehicleSales

Source: PRP Research/ABS 9314.0 Sales of New Motor Vehicles

a e as

at March

25

a e

months

prior

a e

months

prior

Cash Rate 7. 25 % 6 .75 % 6 .25 %

90 Bank Bill Rate 7. 77 % 7 .24 % 6 .53 %

10 Year Bond Rate 6. 130 % 6 .36 % 5 .84 %

Consumer Price Index (all groups) 160.1 160.1 158.6

Unemployment Rate 4.1% 4.4% 4.5%

Dwelling Approvals - Private sector (mthly) n/a 12,600 12,100

Non Residential approvals - Private sector (mthly) n /a $ 1, 84 1m $ 2, 19 5m

88.6

Economic Indicator

Westpac - Melbourne Institute Consumer Sentiment Index

(Base 100) 11 2. 5 11 5. 5

Source: PRP Research/ABS and RBA Bulletin


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The Sydney CBD retail market is the tightest onrecord as businesses compete for limited remain-ing space after the closure of Pitt Street Mall forredevelopment.

The withdrawal of the retail space in the mall haspushed rents up with shops that had been charg-ing $1,900 per square metre now pushing $3,000per square metre.

The outlook for the CBD is to remain tight for atleast two years. The CBD vacancy rate fell to 1.3per cent in December 2007 from an already tight1.4 per cent in April 2007.

The closure of the super prime Pitt Street Mallhas made nearby retail zones attractive includingthe new Ivy complex in George Street and the Met

centre. Before its closure, Pitt Street Mall was gen-erating $6,350 per square metre and yields werebetween 4.75 per cent and 5.75 per cent.

Prime locations in the Sydney CBD were on a yieldof 4.75 per cent to 7.5 per cent in the final quarterof 2007, with rents of about $2,400 per squaremetre being charged. Secondary CBD site yieldswere 6.5 per cent to 8 per cent and rent was$1,359 per square metre.

Given the high entry barriers such as finding suit-able retail space and the extensive developmentapproval process, freehold ownership for City Cen-

tre retail assets continue to be tightly held.

The market is currently dominated by cashed upproperty funds such as Westfield, GPT, Thakraland Mirvac due to their ability to largely own, de-velop and manage shopping centres which haveotherwise been difficult for smaller scale privateinvestors.

Market Activity

Development PipelineIt is understood that Bovis Lend Lease will develop

the tower at the Mid City Centre redevelopmentwhich is scheduled for completion in 2010 whilstleasing and management will be administered byLend Lease Retail.

City Centres

City CentreCity Centre GLA > 1,000 sqm

Within an arcade or mall development

Promoted as an entity within a major Central Business District (CBD)Property Council of Australia

There are currently 45 retail City Centre type shopping centres within the NSW market accounting for approximately6.6 per cent of total retail gross lettable area (GLAR) (385,528 sqm).

The City CBD retail market will also see construc-tion works begin for Westfields controversial $600million Pitt Street mall development which plansto increase the current 31,000 square metres

gross lettable area to 38,000 square metres.

With limited available retail space, the market hasseen many existing retail asset owners undertakeredevelopment and refurbishment activities asthey take advantage of the value-added opportu-nities to maximise rental income and asset value.

A summary of other construction projects are de-tailed in the table below.

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Source: Reed Construction Data and various sources

CENTRE SUBURBCONSTRUCTION

TYPE

SPACE

(SQM) COMPLETE

Queen Victoria

Building SYDNEY Extension 5,300 Dec-08

The Esplande TERRIGAL New 4,666 Dec-09

Investment SalesIn February 2007, The Australian Prime PropertyFund emerged with the purchase of a 25 per centstake in Sydneys Mid City Centre for $70 million.The site is currently under construction and willcomprise 55 shops with a 30 level office tower ontop due for completion in 2010.

In April 2007, the GPT Group launched their $2billion shopping centre fund. GPT received cashproceeds of $1.2 billion in March 2007 as consid-eration for the sell down of its interest in theFund (currently 40 per cent of the Fund).Through this holding the GPT Wholesale Shop-ping Centre Fund sold the Wollongong Centralshopping centre to GPT group for $217.0 million.

Leasing MarketWith the closure of the Mid City Centre (currentlyunder construction) in Pitt Street Mall a numberof neighbouring shopping areas have becomepopular including; The Ivy complex in GeorgeStreet - has leased space to Mimco, Portmans,

and Peter Alexander, and the Met Centre linkingGeorge Street and Wynyard train station - a num-ber of fashion stores have moved in as well aschocolatier Max Brenner.


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With high barriers to entry, Super Regional shop-ping centres have been tightly held and subjectto major redevelopment activities underpinned by

strategic actions to add value to existing assets.

The Super Regional shopping centres marketcontinues to be dominated by the WestfieldGroup which accounts for over 50 per cent of thetotal gross lettable area.

Since its redevelopment, Westfield Parramattanow accommodates for an additional 70 newspecialty shops, upgraded arcade and 200 newcar spaces; still remaining the largest Super Re-gional Shopping Centre within the NSW market.

The graph on the top right illustrates the movingannual turnover per square metre for all the su-per regional shopping centres for 2007. WestfieldParramatta recorded a 6.04 per cent rise in mov-ing annual turnover (MAT) sales for the year toDecember 2007, reflecting a MAT rate of only$5,112/sqm.

Despite being exposed to the highest pedestrianestimate of 22.3 million people (see secondgraph on the right), this figure was well belowthe average MAT rates recorded for all SuperRegional Shopping centres in the NSW market at$6,411/sqm.

The strongest performing Super Regional shop-ping centre in terms of moving annual turnoveron a per square metre basis was Westfield BondiJunction with a MAT of $8,801/sqm (up by 9.4per cent from 2006).

Other top performers included Warringah Mallwith a MAT of $6,542/sqm.

Super Regional Centre

Super Regional CentreSuper Regional Centre

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Market Activity

Investment SalesSuper regional assets continue to remain tightlyheld over 2007 with only one reported majorsales transaction. GIC Real Estate purchased a50 per cent stake in Westfield Parramatta for$717.5 million reflecting a rate of $10,250/sqm.

Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007

GLA > 85,000 sqm

Two or more full line department stores

One or more full line discount department stores

Two supermarkets

Approximately 250 specialty shopsProperty Council of Australia

There are currently 8 Super Regional type shopping centres within the NSW market accounting for approximately 13.7per cent of total GLAR (803,113 sqm)

Super Regional Shopping Centres

Moving Annual Turnover Per Square Metre

$4,000

$4,500

$5,000

$5,500

$6,000

$6,500

$7,000

$7,500

$8,000

$8,500

$9,000

Erina Fair Macquarie

Centre

Warringah Mall Westfield Bondi

Junction

Westfield

Hornsby

Westfield

Miranda

Westfield

Parramatta

Super Regional Shopping Centre

MovingAnnualTurnover($/sqm)

Pedestrian Estimate - Super Regional Shopping Centres

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

Erina Fair Macquarie

Centre

Warringah Mall Westfield Bondi

Junction

Westfield

Hornsby

Westfield

Miranda

Westfield

Parramatta


50% stake inWestfield Parramatta

Sold for $717.5 million


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The graph on the right illustrates the movingannual turnover (MAT) per square metre andspecialty sales per square metre for all the majorregional shopping centres for 2007. Top perform-ers in the NSW Major Regional type shoppingcentre market on a MAT per square metre basiswere Westfield Penrith ($6,960/sqm) and West-field Chatswood ($6,812/sqm).

In the category for specialty sales, ChatswoodChase outperformed all other Major Regionalshopping centres with a Specialty MAT of$21,804/sqm from its 140 specialty stores fol-lowed by Westfield Eastgardens with a specialtyMAT of $20,241/sqm.

Centro Bankstown however, revealed a weaker

performance on a moving annual turnover basisfor both specialty stores ($8,615/sqm) and totalshopping centre sales ($3,553/sqm).

Also notably, Centro Roselands outperformedWestfield Tuggerah and Centro Bankstown on aMAT basis with a turnover of $4,295/sqm, de-spite having one of the lowest pedestrian esti-mates (see second graph on the right) of justover 8.1 million people and lower retail grosslettable area (GLAR) of 59,521 square metres.This is in comparison to a pedestrian estimate forWestfield Tuggerah and Centro Bankstown of10.1 million people and 14 million people respec-

tively and GLAR of 72,590 square metres and77,666 square metres respectively.

Market Activity

Development Pipeline A vast majority of the Super Regional shoppingcentres have either recently completed extensiveredevelopment works or still reconstructed alongthe development pipeline in the medium term.

A summary of the construction projects for majorregional shopping centre are detailed in the table

on the right.

Major Regional Centre

Major Regional CentreMajor Regional Centre

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50,000 to 85,000 sqm GLA

Extensive coverage of full range of retail needs

Usually includes entertainment and leisure attractions

Broad range of shopper facilities and amenitiesProperty Council of Australia

There are currently 16 Major Regional type shopping centres within the NSW market accounting for approximately 18.4

per cent of total GLAR (1,080,485 sqm)


Major Regional Shopping Centres

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,00

0

$11,00

0

$12,

000

$13,

000

$14,00

0

$15,

000

$16,00

0

$17,

000

$18,00

0

$19,00

0

$20,00

0

$21,00

0

$22,

000

$23,

000

Centro Bankstown

Centro Roselands

Chatswood Chase

Macarthur Square

The Broadway Shopping Centre

Westfield Burwood

Westfield Chatswood

Westfield Eastgardens

Westfield Hurstville

Westfield Liverpool

Westfield Penrith

Westfield Tuggerah

$/sqm

Specialty Sales $/sqm Moving Annual Turnover ($/sqm)

Pedestrian Estimate - Major Regional Shopping Centres

0

2,500,000

5,000,000

7,500,000

10,000,000

12,500,000

15,000,000

17,500,000

20,000,000

CentroBankstown

CentroRoselands

ChatswoodChase

MacarthurSquare

TheBroadway

ShoppingCentre

Westfield

Burwood

Westfield

Chatswood

Westfield

Eastgardens

Westfield

Hurstville

Westfield

Liverpool

WestfieldPenrith

Westfield

Tuggerah



TYPE

SPACE

(SQM) COMPLETE

Centro Bankstown

(stage 2) BANKSTOWN Extension 4,032 Dec-08

Keira West Centre WOLLONGONG Extension 84,000 Dec-08

Chatswood Chase CHATSWOOD Extens ion 13,700 Jul-09

Centro Roselands ROSELANDS Extens ion 2,346 Dec-09


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Major Regional Centre

Investment SalesMajor Regional type shopping centres continue tobe held tightly by retail giants Centro and West-field over 2007 with only three reported majorsales transactions from CFS Retail Trust, GPTGroup, and DB RREEF

CFS Retail Trust purchased a 50 per cent stake inthe refurbished Chatswood Chase shopping centrefor a reported value of $281.5 million. The buildingarea is 49,450 square metre which equates to abuilding rate of $11,385 per square metre. The

deal was transacted on an initial yield of 5.25 percent substantially leased.

The other major sale was a 50 per cent stake inMacarthur Square by the GPT Wholesale ShoppingCentre Fund to GPT Group for $205.75 million. Thebuilding area of Macarthur Square is 90,500 squaremetres which equates to a sale price of $4,547 persquare metre.

Like GPT Group, DB RREEF Trust established DBRREEF Wholesale Property Fund in 2007. The trustentered into a conditional contract in August 2007with the fund to sell at book value 50 per cent ofits interest in major regional centre WestfieldHurstville for $307.5 million.

Leasing MarketOne lease transaction for major regional shoppingcentre was Di-Mensions leasing 47 square metresof space in Centro Bankstown at a rate of $572.40per square metre on a lease term of 5 years with arental increase of 4 per cent every year. This willgive Centro an initial annual rental income of$26,903 per annum.

Another lease transaction involved Neami Ltd oc-

cupying 288 square metres of space at WestfieldEastgardens at a rate of $270.00 per square metreon a term of 3 years with the option to extend foranother three years.

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50% stake inChatswood Chase sold

for $281.5 million

50% interest inWestfield Hurstville

sold for $307.5 million


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The nature and scope of Regional type shoppingcentres in the NSW market is largely underpinnedby a broad mix of investor demand from propertyfunds such as Stockland and Westfield, syndi-cates and large scale purchasers who have suit-able credentials.

Lake Haven shopping centre emerged as theleading Regional shopping centre with the high-est moving annual turnover (MAT) per squaremetre of $8,126/sqm in 2007 (see top graph onthe right), well above the average Regional cen-tre MAT of $5,764/sqm.

The worst performing regional shopping centreover 2007 was Campbelltown Mall with a MAT

rate of $4,835/sqm and a pedestrian estimate of4.7 million people (see second graph on theright).

Despite having the smallest pedestrian estimateof 3.8 million, Stockland Glendale had a high MATrate of $6,232/sqm well above the average of$5,764/sqm.

Market Activity

Development PipelineStockland and Shellharbour City Council havebeen working together to redevelop Stockland

Shellharbour (pictured on the right). The $200million plus refurbishment upon completion willadd 30,000 square metres of retail space over3,000 car spaces and provide consumers with adepartment store, three discount departmentstores, two supermarkets, and over 200 specialtyshops.

Regional Centre

Regional CentreRegional Centre

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30,000 sqm to 50,000 sqm

Full line department store and full line department store

One or more supermarkets

100 specialty shopsProperty Council of Australia

There are currently 15 Regional Centre type shopping centres within the NSW market accounting for approximately 9.8

per cent of total retail gross lettable area (576,571 sqm).


Regional Shopping Centres 2006

Moving Annual Turnover Per Square Metre

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500

$6,000

$6,500

$7,000

$7,500

$8,000

$8,500

Campbelltown

Mall

Charlestown

Square

LakeHaven

ShoppingCentre

ParkBeachPlaza

StocklandBay

Village

StocklandForster

Stockland

Glendale

Stockland

Shellharbour

Stockland

WetherillPark

TweedCity

ShoppingCentre

WestfieldKotara

WestfieldMt

Druitt

Westfield

Warrawong

Regional Shopping Centre

MovingAnnualTurnover($/sqm)

Pedestrian Estimate - Regional Shopping Centres

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

11,000,000

12,000,000

CampbelltownMall

Charlestown

Square

LakeHaven

ShoppingCentre

ParkBeachPlaza

StocklandBay

Village

StocklandGlendale

Stockland

Shellharbour

StocklandWetherill

Park

SupaFactory

OutletsTuggerah

TweedCity

ShoppingCentre

WestfieldKotara

WestfieldMtDruitt

Westfield

Warrawong

Stockland Shellharbour


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A feature of the NSW Sub-Regional retail marketis that rather than being dominated by one ortwo major property funds and syndicates, there isevidence of a diverse mix in owner types rangingfrom listed property trusts and syndicates to pri-vate investors/owner occupiers and superannua-tion funds such as ISPT.

Given the number of active retail players withinthe market, smaller investors will continue tocompete with market-leading positioned playerssuch as Stockland and Centro who aim to special-ise in sub-regional shopping centres through theiraffluent acquisitions and developments.

Market Activity

Development PipelineDevelopment activities remain strong, with onenewly proposed shopping centre and other projects from redevelopments currently under con-struction.

Further extension projects currently under con-struction are detailed in the table on the rightand include Centros 8,700 square metre exten-sion at Toormina Gardens Shopping Centre and a17,536 square metre extension at Centro LakeMacquarie.

The biggest project comes from the 78,215

square metre extension of the Top Ryde Shop-ping Centre where development work has com-menced on the $1.1 billion town centre in Syd-neys north-western suburbs.

The centre is on the corner of Devlin Street andBlaxland Road and will be called Top Ryde City. Itwill be four times as big as the existing 20,000square metre mall and will include child care, agym, multi-level parking, significant infrastructureimprovements and pedestrian bridges.

The retail component is expected to be com-

pleted over three stages, with stage one openingbefore Christmas 2009.

Sub-Regional Centre

SubSub--Regional CentreRegional Centre

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10,000 to 30,000 sqm

One full line discount department store

Major supermarket

Approximately 40 specialty shopsProperty Council of Australia

There are currently 82 Sub-Regional Centre type shopping centres within the NSW market accounting for approximately

24.2 of total retail gross lettable area (1,420,312 sqm)

Investment SalesSub-regional assets appeared to be tightly heldover 2007 with only one reported major salestransactions from GPT Group. The Group ac-quired Carlingford Court from their WholesaleShopping Centre Fund for $192 million reflectinga rate of $5,801/sqm on the propertys purchaseprice.

Anchor tenants include Target (8,100 sqm),Woolworths (3,869 sqm), Coles (3,500 sqm) and112 other specialty stores.


Artist's Impression

Top City RydeDevelopment


TYPE

SPACE

(SQM) COMPLETE

Bonnyr igg Plaza BONNYRIGG Extension 13,772 Mar-08

Armidale Centre ARMIDALE New 21,255 Mar-08

Toormina Gardens

Shopping Centre TOORMINA Extension 8,700 Nov-08

Centro Lake

Macquarie MOUNT HUTTON Extension 17,536 Dec-08

Gowrie Street Mall SINGLETON Extension 10,500 Mar-09


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Investor demand within the neighbourhood shop-ping centres market is largely characterised byhighly active institutional players such as both

listed & unlisted funds including GPT Group, FKPProperty Group, Becton and Unity Plus Invest-ments and private syndicates.

Much of the competition has also been driven byincreasing interests from private investors/owneroccupiers who have emerged into the market overthe year and accounting for a growing share ofownership in neighbourhood shopping centres.

The success of neighbourhood shopping centresand their ability to attract investors through rentalincome on long term leases has also been under-pinned by giant supermarket tenants - Coles Group

and Woolworths.

With over 740 Coles and over 190 Bi-Lo supermar-ket stores across Australia and the trade area ofWoolworths supermarkets increasing by 5.7 percent in 2007, these supermarkets will have a sig-nificant ability to shape the retail landscape of Aus-tralias food and grocery sector within neighbour-hood shopping centres.

Retail trends such as one-stop shopping trips foreveryday retail needs and food-based shoppingtrips have all highlighted the importance forneighbourhood shopping centres to provide a su-

permarket situated in a strategic location conven-ient for consumers in the local area.

Market Activity

Development PipelineMetro ChatswoodThe Precision Group has seized the opportunity tobuy a new neighbourhood shopping centre to benamed Metro Chatswood, following its completionat the end of 2008 for an agreed minimum price of$83 million.

Metro Chatswood shopping centre is part of theChatswood Transport Interchange development,one of the largest joint public-private infrastructureprojects ever undertaken in Australia.

Neighbourhood Centre

Neighbourhood CentreNeighbourhood Centre

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GLA less than 10,000 sqm

Local shopping centre with supermarket Approximately 35 specialty stores

Usually located in residential areasProperty Council of Australia

There are currently 217 Neighbourhood type shopping centres within the NSW market accounting for approximately17.0 per cent of total retail gross lettable area (998,203 sqm)

The overall $360 million project will comprise anew railway station line for the new Chatswood-Epping Rail line; a new bus interchange; three

residential towers comprising a total of five hun-dred apartments; and the new Metro ChatswoodShopping Centre.

The shopping centre located on Victoria Avenue inChatswood will provide 11,500 square metres ofretail space with the Precision Group controllingand managing the future leasing of the ongoingdevelopment.

Artist's Impression

Metro ChatswoodDevelopment

Stockland Cammeray

Stockland has acquired the retail component ofCammeray Square, a new mixed use developmenton Sydneys lower north shore, for approximately$42 million.

Cammeray Square, which includes both residentialand a retail component, is being developed byHamptons Development Group and will include atotal gross lettable area of approximately 5,000square metres across four levels of retail space.Stockland will acquire the retail and retail parkinglevels on completion of the development in Au-gust 2008.

The retail centre will be branded Stockland Cam-meray and Stockland will undertake the leasing,tenancy design, marketing and delivery of theretial component.


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Neighbourhood Centre

Some major neighbourhood centres currentlyunder construction are summarised in the tableon the right.

Investment SalesDemand for neighbourhood shopping centresremained buoyant over the year with over 12reported sales transactions totalling an estimatedvalue in excess of $300 million.

As a result of limited supply levels and increasingdemand from a broad spectrum of investors,

yields have shown signs of compression.

An indicative yield of around 6.78 per cent hasbeen reflected from the number of sales transac-tions with yields ranging from 5.05 per cent to ashigh as 8.00 per cent which were achieved fromthe Norton Plaza Shopping centre sale ($112million) and Maitland Marketplace ($4.3 million)respectively.

The most significant sale involved the NortonPlaza Shopping Centre in Leichhardt in October2007 selling for $112 million. The 10,495 squaremetre centre is anchored by Coles and was trans-

acted on an initial yield of 5.05 per cent fullyleased.

Other notable neighbourhood shopping centressold in 2007 included Forestway Shopping Centre($78.1 million), Illawong Village ($30 million),Kareela Shopping Centre ($22.6 million) and EastMall Shopping Centre ($16.150 million). Details ofthe highest sales transaction for neighbourhoodshopping centres for 2007 are included in thetable below.

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Source: Commercial Property Monitor


PROPERTY SUBURB QUALITY SALE PRICE

SALES

MONTH BLG AREA

BLG

RATE/SQM YIELD

Norton Plaza Shopping Centre LEICHHARDT Modern $ 112,000,000 Oct-07 10,495 5,801$ 5.05%

Forestway Shopping Centre FRENCHS FOREST Secondhand 78,100,000$ Apr-07 9,600 8,135$

Illawong Village Shopping Centre ILLAWONG Refurbished 30,000,000$ Apr-07 6,600 4,545$ 7.25%

Kareela Shopping Centre KAREELA Secondhand 22,600,000$ Jun-07 4,152 5,443$ 6.12%

East Mall Shopping Centre ARMIDALE Secondhand 16,150,000$ Oct-07 5,562 2,904$ 7.99%

Boambee Central Shopping Centre COFFS HARBOUR Secondhand 10,950,000$ Feb-07 8,046 1,361$ 6.46%

Leasing MarketThe Precision Group has secured Woolworths toanchor its new Metro Chatswood shopping cen-

tre. Woolworths has committed to a 2,700 squaremetres supermarket on a 20 year lease with op-tions. The new supermarket will be located di-rectly opposite the entrance to the new Chats-wood Railway Station.

Precision acquired the vacant office building ad- joining the Metro Chatswood site from SydneyWater Corporation for $14.1 million. The com-pany has secured development approval to con-vert the ground floor of the office building intothe Woolworths tenancy and integrate it with theMetro Shopping Centre.

Other leases established occurred at EastwoodVillage Square A Photographic shop was leasedto Jin Lin Yang at a rate of $1,055.45/sqm over44 square metres for a term of 4 years with theoption to extend for another 4 years; Sunny RoyLtd leased 105 square metres at a rental rate of$784.57/sqm on a term of 3 years with an optionto extend for 3 years.

Go-Lo has leased 536.2 square metres at South-point Shopping Centre in Hillsdale at a rate of$173.22/sqm.

Three stores underwent rent reviews at MillerShopping Centre which are detailed in the tablebelow.

LESSEE RENT/SQM

AREA

(SQM)

Franklins $ 155.52 1,543.8

Woolworths Limted $ 109.97 3,551.0

Mitre 10 $ 181.33 925.0


Sold for$112 million

Sold for$78.1 million


TYPE

SPACE

(SQM) COMPLETE

Northlakes Shopping

Centre SAN REMO New 4,750 May-08

Chester Square

Shopping Centre CHESTER HILL Extension 7,900 Jun-08

Riverfront Plaza KEMPSEY New 6,279 Jul-08

Waterworth Drive MOUNT ANNAN New 4,650 Jul-08

Orange Metro Plaza ORANGE Extension 1,342 Sep-08

Morisset Central

Shopping Centre MORISSET New 8,576 Dec-08


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As one of the fastest growing retail sectors, Aus-tralias bulky goods retail sector has successfully

established itself as a major part of Australiasretail landscape.

Major property trusts/funds, including large re-tailers themselves have been able to capitalisethe success of the bulky goods industry throughtheir developments, redevelopments and acquisi-tions.

The highly competitive environment for the bulkygoods sector has been largely characterised bycompeting interests between: major funds/syndicates and investors to at-

tract quality anchor tenants; developers and retailers in finding suitable site

and land opportunities supported by suitableland and transport infrastructure;

other small retail tenants who have to com-pete with large retail giants

new bulky goods centres and existing retailersin the area

Whilst the bulky goods sector has benefited fromstrong retail spending on household goods andDIY home improvements in recent years, anemerging concern has been the current weakNSW housing market and the interest rate in-

creases.

Over the past year, Sydneys deteriorating hous-ing market has been characterised by rising mort-gagee sales, a decline in building approvals and atight residential rental market at only 1.0 percent vacancy.

With high interest rates creating pressure onhousing affordability, the bulky goods retail sec-tor will continue to be challenged by the adverseeffects of Sydneys weak residential propertymarket.

Bulky Goods Centre

Bulky Goods CentreBulky Goods Centre

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GLA greater than 5,000 sqm

Dominated by bulky goods retailers (furniture, white goods and other home wares) Located adjacent to large regional centre or in non-traditional retail locations

Property Council of Australia

There are currently 27 Bulky Goods type shopping centres within the NSW market accounting for approximately 9.1 percent of total retail gross lettable area (535,947 sqm)

Market Activity

Development PipelineDespite the weak residential property market de-

velopment of new bulky goods centres over thenext two years is high with over 163,000 squaremetres of retail space coming onto the market.

Details of some developments are given in thetable below.

Investment SalesThe bulky goods sector has been relatively tightlyheld over the last year. One major transactionincludes the purchase of Tweeds Heads Home-

maker Centre by Brett Blundys BB Retail Capitalfor $30 million on an initial yield of 7.25 per cent.

Charter Hall has acquired a portfolio of six ware-houses from the Bunnings Group located in NSW,QLD, VIC and the ACT for a combined total of$127.6 million on an initial yield of 6.2 per cent.The bulky goods assets have been leased to Bun-nings with a lease term of 12 years and rentalgrowth of 3 per cent per annum. Two warehouseswere purchased in NSW in the suburbs of Penrith(sold for $26.5 million) and Nowra (sold for $13.7million).


TYPE

SPACE

(SQM) COMPLETE

HighlandsHomemaker Centre MITTAGONG New 12,000 Jun-08

Greenway SupacentaWETHERILL

PARK New 35,790 Jul-08

Borella RoadHomemaker Centre ALBURY New 23,812 Aug-08

Dubbo HomemakerCentre DUBBO New 24,574 Sep-08

Outlet CentreCampbelltown

CAMPBELLTOWN New 18,500 Dec-08

Batemans BayLifestyle Centre BATEMANS BAY New 19,000 Sep-09

Kotara HomemakerCentre NEWCASTLE New 30,000 Dec-09



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Bulky Goods Centre

Leasing Market

Two lease transactions was reported for thebulky goods complex The Trade Centre at Jami-sontown AGL Retail Energy renewed their occu-pancy of 306 square metres of space at a rentalrate of $221.15/sqm for a term of 3 years; andWhitewood Warehouse established a new leasefor 1,096 square metres at a rate of $100.36/sqmon a term of three years with the option to ex-tend for five years.

A number of new leases were established in GPTGroup owned and managed Homemaker CityBankstown. Details of the leases are illustrated inthe table below.

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LESSEE RENT/SQM

AREA

(SQM)

TERM

(YRS) REVIEW BASIS

Get Down Furniture $ 298.46 601.0 5 1 yrly @ 5%

Decorug $ 438.22 251.0 5 1 yrly @ 4%

One Stop Pine $ 302.66 642.0 5 1 yrly @ 4%

Fantastic Furniture $ 266.12 1,520.0 5+5 1 yrly @ 3%

Sleepys's $ 416.76 216.1 5 1 yrly @ 3%

Superfurn $ 376.21 399.0 5+3 1 yrly @ 5%

World of Beds $ 404.83 395.0 n/a 1 yrly @ 3%Retravision $ 281.20 1,285.0 5+5 1 yrly @ 3%

Bing Lee $ 292.96 1,938.0 5 1 yrly @ 3.5%

Solomons Floorings $ 241.69 290.0 5 1 yrly @ 5%

Freedom Furniture $ 267.64 2,646.0 n/a 1 yrly @ 3%

AB Furniture $ 384.15 455.0 5 1 yrly @ 4%

Sleeping Giant $ 365.85 520.0 5 1 yrly @ 4%

Contours Express Fitness $ 257.98 415.4 5 1 yrly @ 3%

Yeah Modern Furniture $ 66.12 605.0 5 1 yrly @ 3%

Hidden Treasure Caf $ 348.18 48.3 5 1 yrly @ 5%

Hungry Jacks $ 231.60 883.0 5+5 1 yrly @ 3%



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PRP Research Division December Quarter 2007

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