Investors are using the low and unchanged interests rates to start to the new financial year on a busy note with the landmark Kings Cross Centre, being the latest sale, for $37.3 million to a private Australian property trust.
The deal was secured by LJ Hooker Commercial Sydney chief executive Warren Duncan and agent Stanley Wang, who said the demand for higher yielding bricks and mortar investments had supported a strong sales campaign.
According to LJ Hooker Commercial, Sydney retail property purchases rose to $1.5 billion in the last financial year, an increase of about 15 per cent on the previous financial year's transactions.
On Tuesday, the Reserve Bank of Australia, kept the official cash rate at 2 per cent, thanks to the continued strong property market.
Colliers International's national director of research, Nerida Conisbee, said the Australian economy continues to show sub-trend growth, facing headwinds caused by falling commodity prices and a hangover from one of the largest mining booms.
"Whilst the NSW and Victorian economies pace ahead, the Western Australian and Queensland economies continue to experience challenges as their resource-driven growth continues to decline," Ms Conisbee said.
But buyers remain optimistic, with the Kings Cross centre, beneath the iconic Coca-Cola sign at 82-94 Darlinghurst Road centre at Potts Point, selling at a 57 per cent premium for the vendor, who only bought the property in late 2012.
Mr Duncan said the centre's prominent position, proximity to Kings Cross train station and well-rounded tenant mix helped generate significant interest.
"Over the course of the campaign, we fielded more than 150 inquiries, including a strong number of domestic investors. But the weakened Australian dollar has really put our quality retail assets on the radar of international purchasers," Mr Duncan said.
"We've seen yields compress dramatically over the last 24 months in Sydney. When we sold the Kings Cross Centre back in 2013, it transacted on a passing yield of 8.3 per cent, and this week it sold at 6.9 per cent.
"In line with this, we also recently sold a restaurant site at 2 Phillips Street housing Fratelli Fresh's Café Nice for $5.92 million, being a 50 per cent capital gain over two years for its seller.
"Rental income has increased considerably, giving rise to competition for well-leased and well located retail.''
The centre's anchor tenant, Coles, is close to its turnover threshold and holds a lease until 2022, while the overall occupancy is 98.5 per cent.
Development land is also in high demand, which has prompted the listing of a vacant property at 628 Pittwater Road, Brookvale. The 4345-square-metre site is being sold through by JLL's David Mathews and Gary Mason.
The property has been held by the Ebsary family since 1954 and is the head office of the family-owned engineering business Ebsray Pumps.
