A site leased to quite possibly Australia’s most remote Kmart is offering investors a rare 9% yield — but is the return worth the risk in a town grappling with crime and social crisis?

In the heart of Central Australia, a blue-chip retail asset is offering investors something rare: a near-9% yield backed by one of the country’s most trusted brands.

Kmart and tyre specialist Mycar jointly anchor the property at 56 Bath Street & 73 Railway Terrace, Alice Springs, which is being sold via expressions of interest with a guide of $21m-$22m.

Kmart, a Wesfarmers subsidiary, holds a 12-year lease to 2032 with options to 2062, and covers its own outgoings. Mycar, owned by Continental AG, is locked in until 2030. The 12,310sqm site sits in the town’s main retail strip alongside Coles, Woolworths, McDonald’s and KFC — serving communities spread across hundreds of kilometres.

Despite being on the market for months, agent Flynn McFall at CBRE says the listing has drawn strong interest from both high-net-worth individuals and institutional buyers.

“They’re looking for a blue-chip covenant with a high yield, which is probably around 8.5% to 9%.”

Kmart’s turnover at the site has grown steadily, with annual net income sitting at $1.85 million plus GST.

“Investment fundamentals are there regardless of where it is,” Mr McFall said. “Any investors looking at Central Australia are open to opportunities as long as the covenant strength is there with the added benefit of a strong return in terms of cash flow.”

The Kmart has a lease out to 2032 with options, while MyCar is locked in until 2030. Picture: realcommercial.com.au

Large format retail a big winner?

Large format retail nationally has returned 12.8% annually over the past decade, with vacancy at just 2.8%, according to CBRE data published in June, with CBRE expecting momentum to continue. JLL points to a near-collapse in new construction squeezing existing centres into scarce, highly sought-after assets.

But the picture isn’t all rosy. Real Commercial senior economist Anne Flaherty warns the sector faces “challenging times” as a weak housing market curbs big-ticket spending on furniture and whitegoods.

“We have a significant property downturn — fewer homes selling, fewer people buying, less movement overall. Even in the rental market, people are staying put longer because there’s less choice out there. Turnover has been pretty subdued, and that’s likely to stay a headwind for some time.”

Kmart, she says, is more insulated than most.

Experts say Kmart is more insulated than most big box retailers when it comes to the cost of living crisis and consumers pulling back discretionary spending. Picture: realcommercial.com.au

“It’s a pretty resilient, well-known brand that people shop in for all kinds of different reasons”, she said, while Alice Springs’ slowly growing, above-average-income population helps the retailer’s case.

Mr McFall adds regional property can offer investor benefits, trading lower capital growth for higher cash flow.

“In the regions, you generally get higher cash flow because land values are lower and there’s less capital growth to bank on. In the city, land values are higher, so investors accept a lower cash flow because they’re compensated by stronger capital appreciation,” he said.

Red centre security concerns

But there’s a headwind that no amount of yield modelling can fully smooth over: Alice Springs’ recent social crises, including elevated property and alcohol-related crime, housing shortages and infrastructure strain in town camps.

Ms Flaherty says this will “absolutely” weigh on sentiment and values.

Crime and unrest in Alice Spring, experts say, weighs on sentiment, but the fundamentals of its retail outlook are still strong. Picture: Getty

“There’s no doubt the value of assets in Alice Springs have taken a hit because of local crime. The risk of products being stolen and property being damaged is much higher in Alice Springs compared to elsewhere in the country.”

Yet that same risk may be what makes the asset compelling, she says.

“The price of a comparable asset in a capital city is going to be much higher. But it’s still a very high-quality tenant — so if the tenant is partnering in providing security for the asset, the return could still be quite good. For income-seeking investors, there could be real benefits.”

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Australia’s mega-wealthy elite and offshore tycoons are using a clever pricing loophole to quietly snap up the hottest suburban moneymakers, triggering a wild land grab.

In a jaw-dropping market anomaly, investors are shelling out record sums for local shopping centres – driving pricing yields down to a decade low – despite rising interest rates for hubs anchored by retail giants like Kmart, Coles, Woolworths, and Target.

Melbourne’s Burwood One – home to the nation’s iconic 24-hour Kmart and a major Coles – sold off-market for a staggering $210m. Source: Stonebridge

Their now not-so-secret strategy comes down to a simple mathematical imbalance: subregional shopping centres trade at a massive 25 per cent discount compared to smaller neighbourhood centres, and there is now an almost complete freeze on new construction.

That’s put a hard limit on the likeliest candidates for takeover if you are hunting in that space – ensuring a new frenzy as major investors reprice the entire asset class.

Fresh national data from commercial real estate firm Stonebridge flagged there are just eight subregional developments across the entire eastern seaboard that fit the brief, with no new ones planned inside established capital city catchments until at least 2030.

With virtually zero new shopping centres arriving this decade, property tycoons are locked in a high-stakes race with cashed up institutions and offshore buyers to snap up the massive landholdings and bulletproof rental income of the hubs that already exist.

Stonebridge revealed $1.16 billion changed hands across just 11 subregional deals over the past year – because existing owners now simply refuse to sell.

The sudden heat has seen major suburban hubs trade for record sums, headlined by Melbourne’s Burwood One – home to the nation’s iconic 24-hour Kmart and a major Coles – selling off-market for a staggering $210m; alongside Bendigo’s Lansell Square, which fetched $110.1m, and Pialba Place in Hervey Bay that was undisclosed but benchmarked at $65-70m.

Pialba Place Shopping Centre in Hervey Bay was bought for $36m in 2019 and believed to have been benchmarked at $65-70m when it sold recently.

To everyday buyers, accepting a record-low yield in a high-interest-rate market sounds like a loss – but to billionaires, paying top dollar today isn’t about this year’s rent cheque, but a high-stakes play to lock up irreplaceable suburban land before it disappears forever.

Stonebridge national partner Carl Molony confirmed buyers were looking well beyond today’s retail rent roll, actively underwriting the sprawling, low-density land beneath them for future expansion and mixed-use redevelopment.

“The investment case has broadened considerably for subregional centres,” Mr Molony said. “Investors are recognising the value of large retail landholdings, multiple income growth drivers and pricing that remains attractive relative to comparable formats.”

“The fact yields have continued to sharpen despite higher funding costs speaks to the market’s conviction in the long-term fundamentals of the sector.”

Unlike smaller neighbourhood strip shops, subregional centres sit on massive blocks of land with low site coverage, averaging just 38 per cent across the format. That leaves vast chunks of prime, well-serviced land under-utilised as carparks and low-density retail inside established catchments.

Bendigo’s Lansell Square sold for $110.1m. Source: Stonebridge

Stonebridge Partner Justin Dowers said those on the hunt in this severe supply shortage include local tycoons, private syndicates and Asian offshore capital.

“Sub-regional centres occupy a unique position within the retail landscape as large-scale assets at a price point accessible to a genuinely broad range of capital,” Mr Dowers said.

“FY26 deals ranged from $65 million to $210 million, which brings private and high-net-worth buyers, syndicates, institutions and offshore groups into the same contest.”

“When opportunities are this scarce and the value proposition remains this compelling, it’s no surprise that competition will only sharpen.”

Among the surprise elements working in its favour is the centres have held up far better than many expected despite cost-of-living pressures hitting everyday families.

Stonebridge Partner Philip Gartland said retail spending has proven surprisingly durable under pressure.

“Retail spending has proven more resilient than many anticipated, with supermarket anchors on long leases underpinning the sustainable income profile of subregional centres,” Mr Gartland said.

“In addition, with specialty rents that in many cases sit below market, there is real reversion potential to capture. The conversion of under-utilised discount department store space is also one of the most immediate value levers available in the sector.”

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Cult discount giant Kmart is launching a stand-alone store format aimed at winning budget-conscious Australian households from Ikea, Amart and Freedom.

The Wesfarmers-owned powerhouse will open its first K Home showroom at Box Hill South in Melbourne’s east on June 18, with most products in the store not available from regular Kmart outlets.

The store will focus on furniture and homewares in a showroom-style format, with curated displays and room-based inspiration designed to help shoppers furnish their homes without paying premium prices.
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Kmart chief commercial officer Callum Smith said the trial would help the retailer bring more of its home range into stores.

“K Home at Box Hill South gives us the opportunity to bring more of our home range into store and better understand how customers want to shop it,” Mr Smith said.

“The space has been designed differently from a traditional Kmart store, with a more immersive home environment, curated displays and room-based inspiration to help customers explore the range in a more intuitive way.

“Customers have embraced Kmart’s home range for many years, and we’ve continued to grow our furniture offer as customer demand has grown.”

Kmart’s K Home concept will bring more furniture and larger homewares into a physical store, with many products not available from regular Kmart outlets. Picture: Kmart

Mr Smith said affordability was central to the new concept.

“At a time when value matters more than ever, this trial is about helping Australian families create a home they love at a price they can afford,” he said.

Colliers commercial agent Jake Beckwith said K Home was more likely to compete with Ikea, Amart and Freedom than Spotlight.

“I wouldn’t put Spotlight in there because they’re more homewares, linen and curtains,” Mr Beckwith said.

“I’d be saying more so the Amarts and Freedoms of the world, or Amart, Freedom and Ikea.

“Absolutely, Kmart’s got their own iconic brand that they work with, and Anko is a bit of a cult figure.

“Everyone looks for those Kmart hacks online, so I think they’ve definitely got a big target audience that they can capture.”

K Home has been designed with curated displays and room-based inspiration to help shoppers furnish their homes without paying premium furniture prices. Picture: Kmart

Mr Beckwith said Kmart’s ability to refresh products quickly and find the right locations would be critical if the concept expanded.

“They’re a really good retailer, a really powerful retailer,” he said.

“They’ve got a strong brand behind them with Anko and they’re able to refresh the product line continuously and keep up with trends pretty quickly and swiftly.

“They’re very well versed in the property sphere, so they know their target locations and making sure that they’re just in front of the right people and the right eyes.”

Mr Beckwith said the smaller K Home format could give Kmart more flexibility than its traditional department stores.

“Being able to be more nimble, these K Homes are able to go into a lot smaller spaces than a typical Kmart would,” he said.

“It allows them to plug the gaps in the network that they otherwise wouldn’t have been able to find.”

Vanta Advisory buyers agent Alex Groh said Kmart’s new K Home format would need to feel different from a regular store while keeping the pulling power of the Kmart brand. Picture: Supplied

Vanta Advisory buyers agent Alex Groh said the concept was a smart way to draw shoppers into a physical retail destination at a time when large-format retailers were battling for foot traffic.

“That’s often the biggest struggle that a lot of large-format retail businesses or bulky-goods businesses have. It is getting people there,” Mr Groh said.

“We know that once people are there, they do spend money.

“So it’s a great way to get them in, a great way to get them looking into bigger-ticket items and buying the ancillary items they generally sell as well.”

Mr Groh said K Home needed to feel different from a regular Kmart while still leaning on the parent brand’s pulling power.

“It can’t lose the Kmart brand entirely,” he said.

“But if it is going to be a unique store, then it has to differentiate itself from the others to attract people to actually go there and not just shop at a regular Kmart.”

The new K Home store at Box Hill South will trial a more immersive showroom-style layout as Kmart pushes further into furniture and homewares. Picture: Kmart

He said the concept would be tested in a competitive furniture market, with discretionary spending still under pressure.

“You’ve got brands that have been around for a long time, your Focus on Furniture, your Nick Scalis,” Mr Groh said.

“But where they may differentiate themselves is bringing the typical Kmart experience and adding that furniture as a layer on top to draw people in.”

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david.bonaddio@news.com.au

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