Takanini’s Southgate Shopping Centre goes to market

12:39 PM Monday November 10, 2014 Colin Taylor

Aerial view of Southgate shopping centre at 230 Great South Rd, Takanini.

The well known Southgate Shopping Centre at Takanini with 31 tenancies generating rent of about $4.4 million annually is up for sale.   

Anchored by an 11,000 sq m Mitre 10 Mega, and a 1648 sq m Briscoes, the single level, 21,158 sq m retail centre occupies a 2.9 ha freehold site at 230 Great South Rd.

The fully leased property is being sold on behalf of Retail Holdings by Doug Osborne, Savills joint managing director and his colleagues Dan Byrne and Kevin Richards, who are marketing it for sale by private treaty closing on November 25.

Osborne says the shopping centre sits within a primary catchment area that has shown exceptional growth over the past decade to reach 54,000 people. 

He says growth over the next 12 years is expected to average more than one per cent every year to reach 63,000 people in the same area by 2026.

“This growth has been driven by Auckland’s housing demand and new greenfields residential subdivisions, with a number of large developments still to come,” Osborne says.

“The shopping centre is a dominant and key corner holding in this housing corridor and provides an outstanding retail investment.”

Byrne says the development of the area has been driven by Auckland’s booming housing market which has forced people to look at outlying suburbs for affordable homes. “And this is driving the success of retail centres like Southgate.”

Retail Holdings CEO Rob Marshall says when development of Southgate began there was very little in the way of large format retail in the area. “It was a strategic move for us. Looking at planning considerations for the area and the population growth projections at the time it made sense.” 

He says that since Southgate opened there have been other substantial retail developments which have pushed the retail expenditure capacity of the Southgate Takanini main trade area to an estimated at $1.35 billion. Growth is expected to average around 4.4 per cent yearly to reach $2.27 billion by 2026.

Byrne says all the hard work has been done at Southgate. “It is well designed, with easy access and visibility and it is fully leased. It is in a strategic position on the corner of Great South Rd and Walters Rd and is well configured. It has strong national tenants and secure income with a weighted average lease term of 5.4 years.”

Marshall says Retail Holdings has decided to sell to “recycle capital” to provide for diversification into other asset classes the company wants to become involved in. “This has been a successful development in a growth area. “We have managed the property well and secured a solid line up of branded retailers.”

The large format shopping centre was built in 2003 and designed as a modern shopping centre in two blocks with 571 on site car parks.

Southgate is segmented into two main parts – Mitre 10 Mega on a separate 1.5 hectare title and Southgate on a 2.9 hectare site, which is strata titled into 27 units.

Byrne says a new owner could sell down the strata titles separately but many retail owners prefer to keep their shopping centres intact. “It is essential that the common areas, overall presentation and the upkeep of shopping centres are of the highest standard to enhance the experience of consumers. However, some of the tenants have expressed interest in owning their stores if this became an option.”

There are two blocks within Southgate. The first block has a Repco store and an ANZ Bank fronting Great South Rd and the remainder of the tenants, including Briscoes, facing the car park. The second block is an angled L-shape and has large format stores fronting the main car park, with specialty tenants facing Walters and Great South Rds. There is a Carl’s Jnr at the centre of shopping centre’s main entrance on Great South Rd.

The site has extensive frontage of about 230 metres to the eastern side of Great South Rd and around 75 metres to the northern side of Walters Rd. Next door to Southgate is a new centre anchored by The Warehouse at the rear of the property, and an adjacent Countdown supermarket-anchored neighbourhood centre.

The retail centre’s stores have reinforced concrete floor slabs and foundations, precast concrete tilt slab walls, with aluminium framed windows and steel framed roofs. The entire property has an assessed earthquake risk of A-plus reflective of the shopping centre’s modern construction.

More than 75 per cent of Southgate’s floor area is in major and large format stores, which contribute nearly 62 per cent of the gross rental income.

Richards says the ratio is consistent with most bulk retail premises and provided a sound recognisable tenant base. “The centre has a well-diversified income stream with a strong mix of complementary national brands. Including Mitre 10 Mega, Briscoes, Repco, ANZ, Stationery City, Kiwibank, Bed Bath and Beyond, Baby Factory, Bedpost and Carl’s Jnr.”

Byrne says a proven, successful trading history combined with strong tenant demand offers potential for future growth in addition to the fixed and market annual rental increases in place.

Richards says a future expansion of Southgate is possible as there is a documented first right of refusal over a Carters building supply store site at 12 Walters Rd.

“It may be possible for a new owner to buy the property should it become available and this could offer additional development opportunities.”

Marshall says the proposed Unitary Plan zoning of Southgate as Town Centre secures its future as the heart of Takanini. “In addition to providing for more residential development in the district, it will result in the expansion of the primary trade area.”

The primary catchment area for the Southgate includes Takanini, Ardmore, Papakura, Red Hill, Conifer Grove, Rosehill, Drury, Hingaia and parts of Karaka Lakes. Significant residential growth has occurred at Addison which will carry 1500 houses when completed, Karaka Harbourside, 442 dwellings when completed and Karaka Lakes, 500 houses.

Byrne says population growth will also be strong at Wattle Downs and intensification around Manurewa and Homai will drive the secondary trade area. “A number of special housing areas (SHAs) have already been notified by Auckland Council and these will provide 1770 new homes within the Takanini Strategic Area, 2670 on Hingaia Peninsula and 350 at Bellfield Rd in Papakura.

“It is expected Southgate’s main trade area will have a 151,450 people by 2026, which leaves plenty of room for retail growth at the centre.”

Osborne says the sale of Southgate is an opportunity for experienced retail owners and investors, property trusts, listed trusts, high net worth wealthy individuals institutional groups and off-shore retail buyers to acquire a rare, highly desirable and dominant multi-let large format asset.

“The centre is well positioned to take advantage of the well-performing hardware and homewares sectors of New Zealand’s retail market. The DIY sector is a retail growth segment and Southgate adjoins various strong retail brands like Carters building materials, Countdown and The Warehouse. Each store attracts customers allowing multiple cross shopping to occur and providing convenience for shoppers.

“The demand for large format centres remains strong with investors attracted by good tenant covenants and long weighted average lease terms,” says Osborne.

True Commercial - Doug Osborne of Savills.jpg

Doug Osborne of Savills.