PRESTON ROWE

Preston Rowe
Paterson NSW
Pty Limited
A.B.N 61 003 139 188

PATERSON
Level 11,
80 Clarence Street,
Sydney, NSW 2000
Phone: +61 2 9292 7400
Fax: +61 2 9292 7404
Email:
mailroom@prpnsw.com.au
Web:
www.prpaustralia.com.au

Sydney Retail Directors

Gregory J. Preston
B.Com., Ass.Dip.Val., FAPI

Market Report
Mobile: 0408 622 400
Email:
gregpreston@prpnsw.com.au

December Quarter 2007 Gregory C. Rowe

B.Bus., FAPI
(Plant + Machinery)
Mobile: 0411 191 179
Email:
gregrowe@prpnsw.com.au
www.prpaustralia.com.au
Corporate Property
Services
Real Estate Valuers
Plant & Machinery Valuers
Property and Asset Managers
Property Investment Consult-
ants
Property Development Con-
sultants
Research Analysts
Listed Fund and Syndicate
Advisers

Preston Rowe Paterson are actively involved in valuation and consultancy
relating to various forms of retail property. These include strip retail
shops, bulky goods retail centres, neighbourhood and regional shopping
centres and theme shopping centres, including theatres and the like.
We also act for national retailers in preparing capital valuations for acqui- INSIDE THIS ISSUE:
sition and disposal purposes and also rental valuations for leased prem-
ises. Retail Indicators 2
City Centre 4
Set out herein is our quarterly research report, which considers the New Super Regional Centre 5 Perth
South Wales retail property markets including matters such as sales, leas- Major Regional Centre 6
ing and development activities. Regional Centre 8
Sub-Regional Centre 9
In addition to carrying out valuations and consulting in the retail sector, Neighbourhood Centre 10
we also undertake retail property and asset management on behalf of Bulky Goods Centre 12
clients. About Preston Rowe Paterson 14
Please contact either Greg Preston or Greg Rowe if you have any retail
valuation or asset management requirements.
Australian Offices
Adelaide
Phone: + 61 9292 7400
Ballarat
Phone: + 61 3 5334 4441
Brisbane
Phone: + 61 7 3846 2822
Canberra
Phone: + 61 2 6257 7112
Central Coast & Hunter
Phone: + 61 2 4324 0355
Gippsland
Phone: + 61 3 5672 4422
Gold Coast
Phone: + 61 7 5574 2599
Melbourne
Phone: + 61 3 9602 1333
Mornington
Phone: + 61 3 5975 0480
Phone: + 61 8 9221 1188
Sydney
Phone: + 61 2 9292 7400
New Zealand Office
Auckland
Phone: +64 9 921 5140
Powered By:

Please note: that whist we endeavour to use the latest data available some figures may not
incorporate the effects of recent interest rate rises, effects of the stock market crash and the 1 Associated Globally
continuing sub-prime credit crisis in the US. We expect some graphs to trend downwards as
updated data becomes available.
 Preston Rowe Paterson
Retail Indicators December Quarter 2007

Retail Indicators
Retail Turnover
The graph on the top right shows the total sales
turnover for the retail sector in NSW over 2007. NSW Retail Turnover (2007)

Over the analysed period the total sales turnover 6600.0

6500.0
2

has trended upwards. Total sales turnover for the

1.5

Quarterly Percentage Change (%)

6400.0
1

retail sector in NSW increased by 8.2 per cent 6300.0

0.5

Retail Turnover $million

over the year to December 2007 to $6,534.1 6200.0

6100.0
0

million, also reflecting a slight 0.5 per cent in- 6000.0

-0.5

crease from the previous month of November 5900.0

-1

2007.
5800.0 -1.5

5700.0 -2
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
The second graph on the right shows the break- December 2006 to December 2007

down of the Retail turnover by industry group.

Total Retail Turnover ($ million) Total Retail Sector % Change

Source: PRP Research/ ABS 8501.0 Retail Trade

Much of the turnover in the state’s retail market
is largely contributed by the Household Good
Retailing sector and also the Recreational Good NSW Retail Turnover by Industry Group
December 2007
Retailing sector, increasing by 3.39 per cent and
2.02 per cent over the month to $630.8 million
Hospitality & Services
Industries
Food
$1191.6m

and $929.4 million respectively.

$2455.9m

Other Retailing
$535.5m

The Other Retailing sector emerged with the

highest annual growth in sales turnover over the Recreational Goods
$221.0m

year outperforming all other retail sectors with an Department Stores

$460.0m

increase of 14.8 per cent to $630.8 million. Household Goods

$841.4m
Clothing & Soft Goods
$405.4m

Retail Spending & Consumer Sentiment

The volume of retail spending from Australian Source: PRP Research/ ABS 8501.0 Retail Trade
shoppers over the course of 2007 appeared to
have displayed some resilience to the two inter- Retail Spending and Consumer Sentiment
est rate rises, in August and November, as retail 130.0 20,500

spending increased by an average 0.6 per cent 120.0

Westpac-Melb Institute Consumer

20,000

per month.
Retail Spending ($ million)

110.0
Sentiment Index

19,500
100.0

In December 2007, approximately $20.131 billion 90.0

19,000

was spent on retail trade, up by 0.4 per cent over 80.0

the month. 70.0

18,500

60.0 18,000
Jan-2007

Feb-2007

Mar-2007

Apr-2007

May-2007

Jun-2007

Jul-2007

Aug-2007

Sep-2007

Oct-2007

Nov-2007

Dec-2007

The impact of the first August interest rate rise

did not adversely impact retail trade as shown by January 2006 to December 2006

a slight increase in retail spending as Australian

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

retail trade (current prices) rose by 0.8 per cent Source: PRP Research/ RBA Bulletin

in August and 0.8 per cent in September to ap-

proximately $19.7 billion and $19.861 billion re-
spectively. However, the consumer sentiment
index fell 8.1 per cent to 111.1 in August, down
from 120.8 in July.
The second interest rate rise in November also
saw the consumer sentiment index decline by 4.2
per cent to 110.5 November 2007, down from
115.3 in October 2007.
Whilst the two interest rate rises have been
blamed for the subsequent falls in consumer
sentiment, the Australian retail market still ap-
peared resilient. Powered By:
By the end of December 2007, consumer senti-
ment increased by 1.8 per cent.

Associated Globally

2
 Preston Rowe Paterson
Retail Indicators December Quarter 2007

Motor Vehicle Sales

Retail demand for new motor vehicle sales ap-
peared to experience marked fluctuations with a
New Motor Vehicle Sales in NSW

general trend upwards, mostly reflecting high oil

28,000

prices and the increased interest rates.

Number of New Motor Vehicle Sales

27,000

26,000

After the first interest rate increase in August 25,000

2007, the number of new motor vehicle sales in 24,000

NSW declined by 1.1 per cent over the month to 23,000

26,558 in seasonally adjusted terms. 22,000

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
Latest available figures for December 2007 saw a December 2005 to December 2007

slight decrease in the number of new motor vehi-

cle sales falling by 0.2 per cent to 27,610. Source: PRP Research/ABS 9314.0 Sales of New Motor Vehicles

Whilst motor vehicle sales have improved, con- Rate as Rate 3 Rate 12
cerns for rising crude oil prices and the global at March
25
months
prior
months
prior
Economic Indicator
credit crisis, will continue to add to existing con- Cash Rate 7.25% 6.75% 6.25%
cerns for affordability in the motor vehicle retail 90 Bank Bill Rate 7.77% 7.24% 6.53%
10 Year Bond Rate 6.130% 6.36% 5.84%
market. 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
Strong Population Growth Areas Non Residential approvals - Private sector (mthly) n/a $1,841m $2,195m
A major determinant of Australia’s retail property Westpac - Melbourne Institute Consumer Sentiment Index
(Base 100) 88.6 112.5 115.5
market has been factors relating to population
Source: PRP Research/ABS and RBA Bulletin
growth and the distribution of the population.

Areas which are characterised by high population Strongest Population Growth Areas 2006 to 2007
growth will provide a supply of labour and also a 5.0%

source of demand for the shopping centres. 4.0%

3.0%

The chart on the lower right displays the Local 2.0%

Government Areas (LGAs) across NSW which

% Change

1.0%

recorded the strongest population growth over 0.0%

the year to 2007. -1.0%

Largest Growth
Decline

-2.0%

Blacktown recorded the strongest population -3.0%

growth with a population increase of 1.8 per

Blacktown Sydney (C) Parramatta Auburn (A) Bankstown Liverpool (C) Baulkham Holroyd (C) Maitland (C) Moree Plains
(C) (C) (C) Hills (A) (A)

cent; a rise of 4,933 people. This was closely

Local Government Area

followed by Sydney LGA population growth in- Source: PRP Research/ABS 3218.0 Regional Population Growth

creasing by 4,135 people.

Also notably, Auburn LGA population increased

by 4.2 per cent, rising by 2,882 people

However, recent statistics have identified that the

Moree Plains LGA experienced the state’s largest
decline in population, down by 1.9 per cent re-
flecting the loss of 280 people.

Powered By:

Associated Globally

3
 Preston Rowe Paterson
City Centres
City 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 approximately
6.6 per cent of total retail gross lettable area (GLAR) (385,528 sqm).
The Sydney CBD retail market is the tightest on
record as businesses compete for limited remain-
ing space after the closure of Pitt Street Mall for
redevelopment.
The withdrawal of the retail space in the mall has
pushed rents up with shops that had been charg-
ing $1,900 per square metre now pushing $3,000
per square metre.
The outlook for the CBD is to remain tight for at
least two years. The CBD vacancy rate fell to 1.3
per cent in December 2007 from an already tight
1.4 per cent in April 2007.
The closure of the “super prime” Pitt Street Mall
has made nearby retail zones attractive including
the 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 were
between 4.75 per cent and 5.75 per cent.
Prime locations in the Sydney CBD were on a yield
of 4.75 per cent to 7.5 per cent in the final quarter
of 2007, with rents of about $2,400 per square
metre being charged. Secondary CBD site yields
were 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 development
approval process, freehold ownership for City Cen-
tre retail assets continue to be tightly held.
The market is currently dominated by cashed up
property funds such as Westfield, GPT, Thakral
and Mirvac due to their ability to largely own, de-
velop and manage shopping centres which have
otherwise been difficult for smaller scale private
investors.
Market Activity
Development Pipeline
It is understood that Bovis Lend Lease will develop
the tower at the Mid City Centre redevelopment
which is scheduled for completion in 2010 whilst
leasing and management will be administered by
Lend Lease Retail.
December Quarter 2007
The City CBD retail market will also see construc-
tion works begin for Westfield’s controversial $600
million Pitt Street mall development which plans
to increase the current 31,000 square metres
gross lettable area to 38,000 square metres.
With limited available retail space, the market has
seen many existing retail asset owners undertake
redevelopment and refurbishment activities as
they 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.
CONSTRUCTION SPACE
CENTRE SUBURB TYPE (SQM) COMPLETE
Queen Victoria
Building SYDNEY Extension 5,300 Dec-08
The Esplande TERRIGAL New 4,666 Dec-09
Source: Reed Construction Data and various sources
Investment Sales
In February 2007, The Australian Prime Property
Fund emerged with the purchase of a 25 per cent
stake in Sydney’s Mid City Centre for $70 million.
The site is currently under construction and will
comprise 55 shops with a 30 level office tower on
top due for completion in 2010.
In April 2007, the GPT Group launched their $2
billion shopping centre fund. GPT received cash
proceeds of $1.2 billion in March 2007 as consid-
eration for the sell down of its interest in the
Fund (currently 40 per cent of the Fund).
Through this holding the GPT Wholesale Shop-
ping Centre Fund sold the Wollongong Central
shopping centre to GPT group for $217.0 million.
Leasing Market
With the closure of the Mid City Centre (currently
under construction) in Pitt Street Mall a number Powered By:
of neighbouring shopping areas have become
popular including; The Ivy complex in George
Street - has leased space to Mimco, Portmans,
and Peter Alexander, and the Met Centre linking
George Street and Wynyard train station - a num-
ber of fashion stores have moved in as well as Associated Globally
chocolatier Max Brenner.
4
 Preston Rowe Paterson
Super Regional Centre December Quarter 2007

Super Regional Centre

• GLA > 85,000 sqm
• Two or more full line department stores
• One or more full line discount department stores
• Two supermarkets
• Approximately 250 specialty shops
Property Council of Australia

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

With high barriers to entry, Super Regional shop- Super Regional Shopping Centres

ping centres have been tightly held and subject

Moving Annual Turnover Per Square Metre

$9,000

to major redevelopment activities underpinned by $8,500

strategic actions to add value to existing assets. $8,000

Moving Annual Turnover ($/sqm)

$7,500

$7,000

The Super Regional shopping centres market $6,500

continues to be dominated by the Westfield $6,000

$5,500

Group which accounts for over 50 per cent of the $5,000

total gross lettable area. $4,500

$4,000
Erina Fair Macquarie Warringah Mall Westfield Bondi Westfield Westfield Westfield
Centre Junction Hornsby Miranda Parramatta

Since its redevelopment, Westfield Parramatta Super Regional Shopping Centre

now accommodates for an additional 70 new

Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007
specialty shops, upgraded arcade and 200 new
car spaces; still remaining the largest Super Re-
gional Shopping Centre within the NSW market.
Pedestrian Estimate - Super Regional Shopping Centres
The graph on the top right illustrates the moving
25,000,000
annual turnover per square metre for all the su-
per regional shopping centres for 2007. Westfield 20,000,000

Parramatta recorded a 6.04 per cent rise in mov- 15,000,000

ing annual turnover (MAT) sales for the year to

December 2007, reflecting a MAT rate of only 10,000,000

$5,112/sqm. 5,000,000

Despite being exposed to the highest pedestrian 0

Erina Fair Macquarie Warringah Mall Westfield Bondi Westfield Westfield Westfield
Centre Junction Hornsby Miranda Parramatta
estimate of 22.3 million people (see second
graph on the right), this figure was well below Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007
the average MAT rates recorded for all Super
Regional Shopping centres in the NSW market at
$6,411/sqm.
Market Activity
The strongest performing Super Regional shop-
ping centre in terms of moving annual turnover Investment Sales
on a per square metre basis was Westfield Bondi Super regional assets continue to remain tightly
Junction with a MAT of $8,801/sqm (up by 9.4 held over 2007 with only one reported major
per cent from 2006). sales transaction. GIC Real Estate purchased a
50 per cent stake in Westfield Parramatta for
Other top performers included Warringah Mall $717.5 million reflecting a rate of $10,250/sqm.
with a MAT of $6,542/sqm.

Powered By:

50% stake in
Westfield Parramatta
Sold for $717.5 million
Associated Globally

5
 Preston Rowe Paterson
Major Regional Centre December Quarter 2007

Major Regional Centre

• 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 amenities
Property 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)

The graph on the right illustrates the moving Major Regional Shopping Centres

annual turnover (MAT) per square metre and

specialty sales per square metre for all the major
Westfield Tuggerah

Westfield Penrith

regional shopping centres for 2007. Top perform- Westfield Liverpool

Westfield Hurstville

ers in the NSW Major Regional type shopping Westfield Eastgardens

Westfield Chatswood

centre market on a MAT per square metre basis Westfield Burwood

were Westfield Penrith ($6,960/sqm) and West-

The Broadway Shopping Centre

Macarthur Square

field Chatswood ($6,812/sqm). Chatswood Chase

Centro Roselands

Centro Bankstown

In the category for specialty sales, Chatswood

0

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00

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00

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00

00

00

00

00
$-

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,0

,0

,0

,0

,0

,0

,0

,0

,0

0
0,

1,

2,

3,

4,

5,

6,

7,

8,

9,

0,

1,

2,

3,
$1

$2

$3

$4

$5

$6

$7

$8

$9

$1

$1

$1

$1

$1

$1

$1

$1

$1

$1

$2

$2

$2

$2
Chase outperformed all other Major Regional Specialty Sales $/sqm
$/sqm

Moving Annual Turnover ($/sqm)

shopping centres with a Specialty MAT of

Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007
$21,804/sqm from its 140 specialty stores fol-
lowed by Westfield Eastgardens with a specialty
MAT of $20,241/sqm.

Centro Bankstown however, revealed a weaker

performance on a moving annual turnover basis
for both specialty stores ($8,615/sqm) and total
shopping centre sales ($3,553/sqm). Pedestrian Estimate - Major Regional Shopping Centres

Also notably, Centro Roselands outperformed

20,000,000

17,500,000

Westfield Tuggerah and Centro Bankstown on a 15,000,000

MAT basis with a turnover of $4,295/sqm, de- 12,500,000

spite having one of the lowest pedestrian esti-

10,000,000

7,500,000

mates (see second graph on the right) of just 5,000,000

over 8.1 million people and lower retail gross 2,500,000

lettable area (GLAR) of 59,521 square metres.

0
Centro Bankstown

Westfield Penrith
Centro Roselands

Westfield

Chatswood

Eastgardens

Tuggerah
Westfield

Westfield
Chatswood Chase

Macarthur Square

Shopping Centre

Hurstville

Liverpool
Burwood

Westfield
Westfield
The Broadway

Westfield

This is in comparison to a pedestrian estimate for

Westfield Tuggerah and Centro Bankstown of
10.1 million people and 14 million people respec- Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007
tively and GLAR of 72,590 square metres and
77,666 square metres respectively.

Market Activity

Development Pipeline
A vast majority of the Super Regional shopping CONSTRUCTION SPACE
centres have either recently completed extensive CENTRE SUBURB TYPE (SQM) COMPLETE
Centro Bankstown
redevelopment works or still reconstructed along (stage 2) BANKSTOWN Extension 4,032 Dec-08
the development pipeline in the medium term. Keira West Centre WOLLONGONG Extension 84,000 Dec-08 Powered By:
Chatswood Chase CHATSWOOD Extension 13,700 Jul-09
A summary of the construction projects for major Centro Roselands ROSELANDS Extension 2,346 Dec-09

regional shopping centre are detailed in the table Source: Reed Construction Data and various sources
on the right.

Associated Globally

6
 Preston Rowe Paterson
Major Regional Centre December Quarter 2007

Investment Sales
Major Regional type shopping centres continue to
be held tightly by retail giants Centro and West-
field over 2007 with only three reported major 50% stake in
sales transactions from CFS Retail Trust, GPT
Group, and DB RREEF
Chatswood Chase sold
CFS Retail Trust purchased a 50 per cent stake in
for $281.5 million
the refurbished Chatswood Chase shopping centre
for a reported value of $281.5 million. The building
area is 49,450 square metre which equates to a
building rate of $11,385 per square metre. The
deal was transacted on an initial yield of 5.25 per
cent substantially leased.

The other major sale was a 50 per cent stake in

Macarthur Square by the GPT Wholesale Shopping
Centre Fund to GPT Group for $205.75 million. The
building area of Macarthur Square is 90,500 square
metres which equates to a sale price of $4,547 per
square metre.

Like GPT Group, DB RREEF Trust established DB

RREEF Wholesale Property Fund in 2007. The trust
entered into a conditional contract in August 2007
with the fund to sell at book value 50 per cent of
its interest in major regional centre Westfield
Hurstville for $307.5 million. 50% interest in
Leasing Market Westfield Hurstville
One lease transaction for major regional shopping
centre was Di-Mensions leasing 47 square metres sold for $307.5 million
of space in Centro Bankstown at a rate of $572.40
per square metre on a lease term of 5 years with a
rental increase of 4 per cent every year. This will
give 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 Westfield
Eastgardens at a rate of $270.00 per square metre
on a term of 3 years with the option to extend for
another three years.

Powered By:

Associated Globally

7
 Preston Rowe Paterson
Regional Centre December Quarter 2007

Regional Centre
• 30,000 sqm to 50,000 sqm
• Full line department store and full line department store
• One or more supermarkets
• 100 specialty shops
Property 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).

The nature and scope of Regional type shopping Regional Shopping Centres 2006
Moving Annual Turnover Per Square Metre
centres in the NSW market is largely underpinned $8,500

by a broad mix of investor demand from property $8,000

$7,500
Moving Annual Turnover ($/sqm)

funds such as Stockland and Westfield, syndi- $7,000

$6,500

cates and large scale purchasers who have suit- $6,000

$5,500

able credentials. $5,000

$4,500
$4,000
$3,500

Lake Haven shopping centre emerged as the $3,000

$2,500

leading Regional shopping centre with the high- $2,000

Warrawong
Westfield Kotara

Westfield Mt
Shopping Centre

Stockland

Wetherill Park

Shopping Centre
Park Beach Plaza
Campbelltown

Charlestown

Stockland Bay

Shellharbour
Stockland Forster

Glendale

Westfield
Stockland
est moving annual turnover (MAT) per square

Stockland
Lake Haven
Square

Tweed City

Druitt
Village
Mall

metre of $8,126/sqm in 2007 (see top graph on

the right), well above the average Regional cen-
Regional Shopping Centre

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

tre MAT of $5,764/sqm.
Pedestrian Estimate - Regional Shopping Centres
The worst performing regional shopping centre 12,000,000

over 2007 was Campbelltown Mall with a MAT 11,000,000

rate of $4,835/sqm and a pedestrian estimate of 10,000,000

9,000,000

4.7 million people (see second graph on the 8,000,000

right). 7,000,000

6,000,000

5,000,000

Despite having the smallest pedestrian estimate 4,000,000

of 3.8 million, Stockland Glendale had a high MAT 3,000,000

Warrawong
Stockland Bay

Westfield Mt Druitt
Campbelltown Mall

Shopping Centre

Park Beach Plaza

Shopping Centre

Westfield Kotara
Charlestown

Outlets Tuggerah
Stockland Glendale

Shellharbour

Stockland Wetherill

Westfield
Stockland

rate of $6,232/sqm – well above the average of

Supa Factory
Lake Haven
Square

Tweed City
Village

Park

$5,764/sqm.
Source: PRP Research/ PCA NSW/ACT Shopping Centre Directory 2007
Market Activity

Development Pipeline
Stockland and Shellharbour City Council have
been working together to redevelop Stockland
Shellharbour (pictured on the right). The $200
million plus refurbishment upon completion will
add 30,000 square metres of retail space over
3,000 car spaces and provide consumers with a
department store, three discount department
stores, two supermarkets, and over 200 specialty
shops. Stockland Shellharbour

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Associated Globally

8
 Preston Rowe Paterson
Sub-Regional Centre December Quarter 2007

Sub - Regional Centre

• 10,000 to 30,000 sqm
• One full line discount department store
• Major supermarket
• Approximately 40 specialty shops
Property 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)

A feature of the NSW Sub-Regional retail market

is that rather than being dominated by one or
two major property funds and syndicates, there is
evidence of a diverse mix in owner types ranging
from listed property trusts and syndicates to pri-
Top City Ryde
vate investors/owner occupiers and superannua-
tion funds such as ISPT.
Development
Given the number of active retail players within
the market, smaller investors will continue to
compete with market-leading positioned players
such as Stockland and Centro who aim to special-
ise in sub-regional shopping centres through their
affluent acquisitions and developments.

Market Activity

Development Pipeline
Development activities remain strong, with one
Artist's Impression
newly proposed shopping centre and other pro-
jects from redevelopments currently under con-
struction.

Further extension projects currently under con-

SPACE
struction are detailed in the table on the right CENTRE SUBURB
CONSTRUCTION
TYPE (SQM) COMPLETE
and include Centro’s 8,700 square metre exten- Bonnyrigg Plaza BONNYRIGG Extension 13,772 Mar-08
sion at Toormina Gardens Shopping Centre and a Armidale Centre ARMIDALE New 21,255 Mar-08
Toormina Gardens
17,536 square metre extension at Centro Lake Shopping Centre TOORMINA Extension 8,700 Nov-08
Macquarie. Centro Lake
Macquarie MOUNT HUTTON Extension 17,536 Dec-08
Gowrie Street Mall SINGLETON Extension 10,500 Mar-09
The biggest project comes from the 78,215
Source: Reed Construction Data and various sources
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-
ney’s north-western suburbs. Investment Sales
Sub-regional assets appeared to be tightly held
The centre is on the corner of Devlin Street and over 2007 with only one reported major sales
Blaxland Road and will be called Top Ryde City. It transactions from GPT Group. The Group ac-
will be four times as big as the existing 20,000 quired Carlingford Court from their Wholesale
square metre mall and will include child care, a Shopping Centre Fund for $192 million reflecting
gym, multi-level parking, significant infrastructure a rate of $5,801/sqm on the property’s purchase
Powered By:
improvements and pedestrian bridges. price.

The retail component is expected to be com- Anchor tenants include Target (8,100 sqm),
pleted over three stages, with stage one opening Woolworths (3,869 sqm), Coles (3,500 sqm) and
before Christmas 2009. 112 other specialty stores.
Associated Globally

9
 Preston Rowe Paterson
Neighbourhood Centre December Quarter 2007

Neighbourhood Centre
• GLA less than 10,000 sqm
• Local shopping centre with supermarket
• Approximately 35 specialty stores
• Usually located in residential areas
Property Council of Australia

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

Investor demand within the neighbourhood shop-
ping centres market is largely characterised by
highly active institutional players such as both
listed & unlisted funds including GPT Group, FKP
Property Group, Becton and Unity Plus Invest-
ments and private syndicates.
The overall $360 million project will comprise a
new 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 Chatswood
Shopping Centre.

Much of the competition has also been driven by
increasing interests from private investors/owner
occupiers who have emerged into the market over
the year and accounting for a growing share of
ownership in neighbourhood shopping centres.
The shopping centre located on Victoria Avenue in
Chatswood will provide 11,500 square metres of
retail space with the Precision Group controlling
and managing the future leasing of the ongoing
development.

The success of neighbourhood shopping centres

and their ability to attract investors through rental
Metro Chatswood
income on long term leases has also been under-
pinned by giant supermarket tenants - Coles Group
Development
and Woolworths.

With over 740 Coles and over 190 Bi-Lo supermar-

ket stores across Australia and the trade area of
Woolworth’s supermarkets increasing by 5.7 per
cent in 2007, these supermarkets will have a sig-
nificant ability to shape the retail landscape of Aus-
tralia’s food and grocery sector within neighbour-
hood shopping centres.

Retail trends such as one-stop shopping trips for Artist's Impression

everyday retail needs and food-based shopping
trips have all highlighted the importance for
neighbourhood shopping centres to provide a su-
permarket situated in a strategic location conven-
ient for consumers in the local area.
Market Activity
Development Pipeline
Metro Chatswood
The Precision Group has seized the opportunity to
buy a new neighbourhood shopping centre to be
named ‘Metro Chatswood’, following its completion
at the end of 2008 for an agreed minimum price of
$83 million.
Stockland Cammeray
Stockland has acquired the retail component of
Cammeray Square, a new mixed use development
on Sydney’s lower north shore, for approximately
$42 million.
Cammeray Square, which includes both residential
and a retail component, is being developed by
Hamptons Development Group and will include a
total gross lettable area of approximately 5,000
square metres across four levels of retail space.
Stockland will acquire the retail and retail parking Powered By:
levels on completion of the development in Au-
gust 2008.

Metro Chatswood shopping centre is part of the
Chatswood Transport Interchange development,
one of the largest joint public-private infrastructure
projects ever undertaken in Australia.
The retail centre will be branded Stockland Cam-
meray and Stockland will undertake the leasing,
tenancy design, marketing and delivery of the Associated Globally
retial component.
10
 Preston Rowe Paterson
Neighbourhood Centre December Quarter 2007

CONSTRUCTION SPACE
CENTRE SUBURB (SQM) COMPLETE
Some major neighbourhood centres currently TYPE
Northlakes Shopping
under construction are summarised in the table Centre SAN REMO New 4,750 May-08
on the right. Chester Square
Shopping Centre CHESTER HILL Extension 7,900 Jun-08
Riverfront Plaza KEMPSEY New 6,279 Jul-08
Investment Sales Waterworth Drive MOUNT ANNAN New 4,650 Jul-08
Demand for neighbourhood shopping centres Orange Metro Plaza ORANGE Extension 1,342 Sep-08
remained buoyant over the year with over 12 Morisset Central
reported sales transactions totalling an estimated Shopping Centre MORISSET New 8,576 Dec-08

value in excess of $300 million. Source: Reed Construction Data and various sources

As a result of limited supply levels and increasing
demand from a broad spectrum of investors,
yields have shown signs of compression.
An indicative yield of around 6.78 per cent has
been reflected from the number of sales transac-
tions with yields ranging from 5.05 per cent to as
high as 8.00 per cent which were achieved from
the Norton Plaza Shopping centre sale ($112
million) and Maitland Marketplace ($4.3 million)
respectively.
The most significant sale involved the Norton
Plaza Shopping Centre in Leichhardt in October
2007 selling for $112 million. The 10,495 square
metre centre is anchored by Coles and was trans-
acted on an initial yield of 5.05 per cent fully
leased.
Other notable neighbourhood shopping centres
sold in 2007 included Forestway Shopping Centre
($78.1 million), Illawong Village ($30 million),
Kareela Shopping Centre ($22.6 million) and East
Mall Shopping Centre ($16.150 million). Details of
the highest sales transaction for neighbourhood
shopping centres for 2007 are included in the
table below.
Leasing Market
The Precision Group has secured Woolworths to
anchor its new Metro Chatswood shopping cen-
tre. Woolworths has committed to a 2,700 square
metres 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 Sydney
Water Corporation for $14.1 million. The com-
pany has secured development approval to con-
vert the ground floor of the office building into
the Woolworths tenancy and integrate it with the
Metro Shopping Centre.
Other leases established occurred at Eastwood
Village Square – A Photographic shop was leased
to Jin Lin Yang at a rate of $1,055.45/sqm over
44 square metres for a term of 4 years with the
option to extend for another 4 years; Sunny Roy
Ltd leased 105 square metres at a rental rate of
$784.57/sqm on a term of 3 years with an option
to 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 Miller

Shopping Centre which are detailed in the table
below.
AREA
LESSEE RENT/SQM (SQM)
Franklins $ 155.52 1,543.8
Sold for Sold for Woolworths Limted $ 109.97 3,551.0
$112 million $78.1 million Mitre 10 $ 181.33 925.0
Source: Commercial Property Monitor

Powered By:
SALES BLG
PROPERTY SUBURB QUALITY SALE PRICE MONTH BLG AREA 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%
Associated Globally
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 11
6.46%
Source: Commercial Property Monitor
 Preston Rowe Paterson
Bulky Goods Centre December Quarter 2007

Bulky Goods Centre

• 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 per
cent of total retail gross lettable area (535,947 sqm)

Market Activity

As one of the fastest growing retail sectors, Aus- Development Pipeline

tralia’s bulky goods retail sector has successfully Despite the weak residential property market de-
established itself as a major part of Australia’s velopment of new bulky goods centres over the
retail landscape. next two years is high with over 163,000 square
metres of retail space coming onto the market.
Major property trusts/funds, including large re-
tailers themselves have been able to capitalise Details of some developments are given in the
the success of the bulky goods industry through table below.
their developments, redevelopments and acquisi-
SPACE
tions. CENTRE SUBURB
CONSTRUCTION
TYPE (SQM) COMPLETE

The highly competitive environment for the bulky Highlands

Homemaker Centre MITTAGONG New 12,000 Jun-08
goods sector has been largely characterised by WETHERILL
competing interests between: Greenway Supacenta PARK New 35,790 Jul-08

• major funds/syndicates and investors to at- Borella Road

tract quality anchor tenants; Homemaker Centre ALBURY New 23,812 Aug-08

• developers and retailers in finding suitable site Dubbo Homemaker

Centre DUBBO New 24,574 Sep-08
and land opportunities supported by suitable
land and transport infrastructure; Outlet Centre
Campbelltown CAMPBELLTOWN New 18,500 Dec-08
• other small retail tenants who have to com- Batemans Bay
pete with large retail giants Lifestyle Centre BATEMANS BAY New 19,000 Sep-09

• new bulky goods centres and existing retailers Kotara Homemaker

in the area Centre NEWCASTLE New 30,000 Dec-09

Source: Reed Construction Data and various sources

Whilst the bulky goods sector has benefited from
strong retail spending on household goods and
DIY home improvements in recent years, an
emerging concern has been the current weak
NSW housing market and the interest rate in-
creases.
Over the past year, Sydney’s deteriorating hous-
ing market has been characterised by rising mort-
gagee sales, a decline in building approvals and a
tight residential rental market at only 1.0 per
cent vacancy.
With high interest rates creating pressure on
housing affordability, the bulky goods retail sec-
tor will continue to be challenged by the adverse
effects of Sydney’s weak residential property
market.
Investment Sales
The bulky goods sector has been relatively tightly
held over the last year. One major transaction
includes the purchase of Tweeds Heads Home-
maker Centre by Brett Blundy’s BB Retail Capital
for $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 rental
growth of 3 per cent per annum. Two warehouses
were purchased in NSW in the suburbs of Penrith Powered By:
(sold for $26.5 million) and Nowra (sold for $13.7
million).

Associated Globally

12
 Preston Rowe Paterson
Bulky Goods Centre December Quarter 2007

Leasing Market

Two lease transactions was reported for the

bulky goods complex The Trade Centre at Jami-
sontown – AGL Retail Energy renewed their occu-
pancy of 306 square metres of space at a rental
rate of $221.15/sqm for a term of 3 years; and
Whitewood Warehouse established a new lease
for 1,096 square metres at a rate of $100.36/sqm
on a term of three years with the option to ex-
tend for five years.

A number of new leases were established in GPT

Group owned and managed Homemaker City
Bankstown. Details of the leases are illustrated in
the table below.

AREA TERM
LESSEE RENT/SQM (SQM) (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 Café $ 348.18 48.3 5 1 yrly @ 5%
Hungry Jacks $ 231.60 883.0 5+5 1 yrly @ 3%
Source: Commercial Property Monitor

Powered By:

Associated Globally

13
 Preston Rowe Paterson
PRP Research Division December Quarter 2007
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