Bunnings real estate continues to draw heightened interest and to secure top market pricing for smaller locations closer to or in metropolitan areas. Such was the case for the warehouse sold unconditionally to a private buyer in three days for A$65 million in Collingwood, a suburb outside of Melbourne.
Seven private investors had made a bid to claim the Melbourne adjacent, 7000sq meter store highlighting the appetite to buy Bunnings stores which were sold by the affluent Holckner family, the proprietors of Encore Tissue.
This sale aligns with a new strategy that the home improvement company began with launching smaller storefronts in 2016 in growing inner suburban areas such as Collingwood and Brunswick to capitalise on apartment growth.
According to one of the Burgess Rawson selling agents, Yosh Mendis said the Collingwood sale was the third-highest price paid for a stand-alone Bunnings in Victoria.
The Bunnings portfolio of sold assets also included and in second place, the 21,670sq m Hoppers Cross store which was acquired for A$79 million in 2022, and a not-yet-built 18,626sq m warehouse in Preston was sold for A$85 million in 2021.
The only storefront for sale last year to yield below 4%, was the 6666sq m Swan Hill store in regional Victoria after it was purchased for a cool A$18 million by a Melbourne investor.
For the Collingwood purchase, the storefront should generate an estimated annual income of A$3.12 million and the A$65 million purchase cost might allow for a somewhat tight yield of 4.8%.
The Hoppers Cross was on a 3.95% yield last year while the Preston warehouse would have been on a yield of 4.4%.
For the Collingwood storefront, Bunnings paid A$46 million transforming the empty 1980s office building into a 7000sq m retail store.
“The owner tipped some capital into the refit, but they get the Wesfarmers lease covenant in return,” stated the Bunnings now Chief Property Officer, Andrew Marks.
With the significant returns and prime real estate of the store locations, Bunning’s lease contracts are seen as hot commodities and can be compared to Woolworths and Coles leases.
Due to the small and exclusive amount of these types of large-format warehouses for sale, the low availability is driving interest and competition.
