Wealthy local investors are pouring millions of dollars into suburban shops, despite the current malaise in bricks-and-mortar retail, with the sale of the Sportsgirl store in upmarket Brighton another example of the frenzied appetite.
The 316-square metre shop at 89-91 Church Street, leased to Naomi Milgrom’s Sussan Fashion Group until 2025, sold to Melbourne businessman and property investor Trevor Spencer for $8.2 million – $3.2 million above its reserve price – and on a yield of just 2 per cent.
The underbidder was also a local investor and part of an on-street auction which attracted a crowd of about 250 people and bidding from seven parties.
While Church Street is one of the most tightly held suburban retail strips in Melbourne with a vacancy rate of just 1 per cent, fashion apparel is considered one of the bricks-and-mortar retail categories most exposed to the growth of online retailing.
A yield of 2 per cent is just 50 basis points above the cash rate and well below commercial lending rates. While many private buyers are cashed up, economists fear that when interest rates start to rise then over-leveraged mum-and-dad investors could be caught out and commercial properties values will fall.
Selling agent Rorey James from CBRE, who marketed the Brighton property with colleagues Mark Wizel and Bianca Butterworth, said the reserve price of $5 million was surpassed on only the second bid with seven parties then fighting it out until it sold under the hammer to Mr Spencer for $8.2 million.
“Local buyers continue their ascendancy in 2018,” said Mr James.
The Brighton shop, which has been leased to Sportsgirl for the past 25 years, has been owned by the Kaye family for the past 40 years and was sold as a deceased estate.
It was originally bought by Henrietta Kaye, a prominent anti-whaling activist and her husband William Kaye, a prominent Melbourne barrister, in 1978 for just $294,000. The price paid at auction last week reflected annual average capital growth of nearly 9 per cent per annum over the past 40 years.
The buyer, Mr Spencer, owns the neighbouring building at 93 Church Street – leased to Rock Shop Clothing Co – and is also the owner of seafood importer Seven Seas based in Yarraville.
He is the joint owner of a $30 million suburban office and retail building – 818 Glenferrie Road, Hawthorn leased to jewellery chain Lovisa – which has just been put up for sale through CBRE.
The Sportsgirl Brighton sale follows local buyers snapping up three retail properties within the historic Emerald Hill block in South Melbourne for more than $10 million on yields below 4 per cent.
Recent sales in Brighton include a multi-tenanted retail property at 62-66 Church Street which sold for $11.3 million last year on a 2.7 per cent yield and the Woolworths Brighton, which fetched $32.08 million in 2016 on a 3.8 per cent yield.