It appears that potential first home owners aren’t the only investor groups being squeezed out of the Sydney property market; with retail investors looking to secure regional or sub-regional retail assets also finding it challenging to get a foothold in the market.

As these retail investors continue their pursuit for stronger yields outside of the Sydney metro area, Newcastle is one such beneficiary and is experiencing a significant compression of yields and seeing an improvement in investor confidence, off the back of the NSW Government's Urban Renewal Strategy for the region.

160km north of Sydney, Newcastle is Australia’s seventh largest city, the sixth most visited place in Australia, the second most populated area in NSW, the largest regional economy in Australia and has the world’s largest coal exporting harbor.

The City of Newcastle projecting that in 2036, Newcastle’s population is forecast to be approximately 198,350 up from 165,050 (NSW Planning). According to Deloitte Access Economics, Newcastle contributes $38.5bn or 28 percent into the regional NSW GRP and has a strong unemployment rate of just 5.4 percent, compared to the national average of 6 percent.

According to Urban Growth NSW, “Our vision is an activated city and waterfront that attracts people, new enterprises and tourism. Over time, we see great opportunities to build on the strengths of the city to encourage innovation and enterprising industries to thrive. In the longer term, we see an opportunity to strengthen the city’s position on the regional, national and international stage, with a view to stronger ties with the Asia Pacific.”

According to Steven Lerche, National Director, Retail Investments at Savills Australia, “Newcastle is seeing a surge in investment activity, largely stimulated by the $6.55 billion State Government investment mandate which has brought to light the new light rail system on Hunter Street, the new transport interchange at Wickham, construction of the Newcastle City University Campus and much more.

“We are seeing a lot of investor interest come from the Sydney investment market and interstate markets such as Melbourne and Brisbane due to the significant growth prospects of Newcastle. Retail assets have been in particular favour with developers due their strategic locations, large site area, existing income stream and potential to redevelop under the existing planning controls.

To counter this demand, a centre in Elermore Vale, 9km west of Newcastle is set to hit the market for the first time in 7 years. Elermore Vale has a key primary population of approximately 5,759 residents and an estimated population of around 20,459 within the main trade area.

Located at 133 - 137 Croudace Road, Elermore Shopping Centre is a single level, enclosed neighbourhood shopping centre comprising a large Ritchies SUPA IGA supermarket supported by 17 non-discretionary specialty tenants.

For sale through Steven Lerche and Andrew Palmer of Savills Australia, Elermore Shopping Centre offers 4,048sq m of gross lettable area on a 23,882sq m site including additional land ready for development, car parking for 235 vehicles and an estimated net income of circa $1.44million.

Mr Lerche said an immediate development opportunity exists with a DA for a service station fronting Croudace Road already lodged and awaiting approval.

“There is also further value-add opportunity through an expansion of the existing shopping centre (STCA) and future mixed use development upside”.

According to Andrew Palmer, Associate Director, Retail Investments of Savills, “The median house price in Newcastle is $530,000 compared to approximately $1.1 million in Sydney (according to Domain Group’s rental and house price report) and investors are taking notice.”

Mr Palmer went on to say that it is interesting to note that a new State Custodians Galaxy Poll showed while a high proportion of Victorian investors (72 percent) are still set on buying in Melbourne, almost half of NSW investors (49 percent) are looking beyond the big smoke to invest their money.

“Elermore Vale and its surrounding suburbs are certainly set to reap the benefits of this surge in investor demand.”

Elermore Shopping Centre is for sale through Savills by Expressions of Interest closing 3pm (AEST) on 3 May 2017. It is understood that interest in Elermore Shopping Centre is around the circa $20 million mark.