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Neighbourhood retail centre lures those shopping for resilient assets

A busy neighbourhood shopping centre in the West Auckland suburb of Kelston, with robust tenant covenants and favourable zoning that permits more intensive development activity, is for sale as its offshore owners’ plans change.

Kelston Mall at 16 West Coast Road, Glen Eden occupies a substantial freehold 2.1-hectare site with 290-metres of uninterrupted dual prime frontage to West Coast Road and Great North Road in a growing residential catchment.

The centre was built in 1964 with photographs from that era showing prominent signage for a Foodtown supermarket – the forerunner to Countdown, now Woolworths that is still on-site – and the Maple furniture company.

The shopping precinct has undergone multiple expansions and refurbishments over the years, including the most-recent addition of a childcare centre in 2019, to maintain its status as a diversified and attractive suburban retail/service destination.

The centre has both standalone and integrated components offering 7,729sqm of lettable area and 388 carparking spaces, and has a diverse mix of 30 tenants, several being longstanding occupants.

It is anchored by multi-nationals Woolworths Group, McDonalds and Mobil, complemented by specialty tenants across medical, food and beverage, childcare, retail, beauty and service sectors. Additional income comes from ATMs, kiosks and rooftop telecommunication networks.

The property returns passing annual net income of $2,626,723 plus OPEX and GST, with around half of this coming from the three major tenants, and with a weighted average lease expiry of 3.4 years (by income).

Lease negotiation discussions are advanced with Woolworths for its 10-year lease renewal with potential for base rental upside. McDonald’s has exercised an early lease extension out to 2031, while Mobil Oil New Zealand Limited’s current lease expires November 2026, with a 10-year right of renewal remaining.

There is just one vacancy within the complex – a 185.41sqm retail space with the option to create a tenancy totalling 280.71sqm.

Kelston Mall is being marketed by Ryan Johnson, David Bayley and Jason Seymour of Bayleys via a deadline private treaty campaign closing 25th July.

Bucking the trend of offshore investors increasingly looking for opportunities in New Zealand, Johnson says Kelston Mall’s owners have now decided to recycle capital back into Asia, after acquiring the property in early 2020.

“Retail centres with scale in core growth locations are attracting solid attention from private capital including family offices, well-resourced individuals and offshore investor entities.

“Kelston Mall is a quintessential neighbourhood shopping centre with a low risk profile, strong total returns with a better yield than many other commercial offerings, diverse occupier profile including big-name listed operators, and an underlying capital growth story.

“On top of this, the Business - Local Centre zoning with its 16-metre or four-storey height limit under the Auckland Unitary Plan is proposed to increase to 21 metres or six storeys under Plan Change 78, which adds another layer of opportunity for future redevelopment of the site to optimise the walkable catchment overlay.”

With available development land in tight supply across Auckland, Johnson says this opportunity in an area with a significant and growing demographic has fundamental advantages.

“The statistical area containing Kelston is forecast to grow by 36 percent by 2038, while data from the 2018 Census shows there’s a robust residential catchment of around 420,000 residences within a 10-kilometre radius of Kelston Mall, including those in Henderson, Glen Eden, and Avondale.

“You simply can’t replicate a landholding of this size on a prominent corner with exposure to over 50,000 cars daily and astute investors will appreciate this.

“We’re in that counter-cyclical real estate spot right now with indications that the OCR tide will turn, interest rates will start to fall and money in the bank will attract lower returns and be recirculated into other avenues including commercial property.”

David Bayley said a recent Bayleys’ delegation to Australia and Southeast Asia confirmed that New Zealand commercial assets are highly sought-after with global private and family office wealth.

“Particularly as there’s an opportunity to buy ahead of the real estate curve with arguably greater value and less market competition to be realised currently.

“Our global real estate partner Knight Frank is noting strong interest in Australian neighbourhood retail assets and this is encouraging for the New Zealand market as we tend to mirror trends across the Tasman, albeit slightly delayed.

“Buyers are looking for well-located options that have sound returns and add-value or upzoning benefits. Kelston Mall has identified future upside waiting to be unlocked and with the high-profile anchor tenants underpinning the value equation, we expect to field good enquiry on the property.”

The Infrastructural Commission thinks 49 percent of the country’s future population growth will occur in Auckland, adding around 648,000 to the city’s population by 2048.

Jason Seymour says Auckland remains the country’s economic powerhouse and the main beneficiary of immigration so naturally, “the smart money is attracted to that”.

“West Auckland is still seen as an affordable place to live and with good transport connections, has the convenience factor being around a 25-minute drive from Auckland’s CBD.

“Kelston's demographic profile is primarily composed of young families, with a median age of 30 and with 67% of the population having children. This drives the popularity of Kelston Mall as the go-to neighbourhood shopping centre – heightened when you consider the cost of living and fuel prices which support spending close to home.

“Projected residential growth will further stimulate local economic activity and service retail should benefit hugely.”

Click here for more information on the listing.

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