Premium price paid for ageing Northcote retail centre

Residential development above shopping centres and supermarkets is a growing trend. The Piedimonte family has recently proposed building apartments above a new supermarket in nearby North Fitzroy.

The buyer is understood to have beaten developers and major retailers, including Mirvac, Pace and Woolworths to buy the site. Neighbouring regional shopping centre, Northcote Plaza, boasts two Coles supermarkets. When Coles closed Bi-Lo, a second supermarket was opened rather than leave the space open to a competing retailer.

Recent commentators on the Northcote byelection, focused on its hipsters and cool cafes, may never have set foot into either shopping centre which retain a down-at-heel early '90s atmosphere. Christos Tsiolkas set scenes in his hit novel The Slap in the retail complex and the adjoining All Nations Park.

Northcote Central was built in 1989 and opened in 1990. The 1980s architecture has not aged well and locals still mourn the loss of the Carters Arms hotel which was demolished to build it.

It is anchored by an Aldi supermarket, has 13 shops, including a Lincraft outlet and a Reject Shop. The Bank of Sydney (previously the Laiki Bank) and a Vinnies op shop occupy the High Street fronting shops.

The property earns a passing income of $1.18 million but could return up to $1.33 million if fully let. Title deeds indicate that a company called Sporran Quentin paid $4.8 million for the centre in 1995.

Local real estate agent Tom Moss from Moss Estate Agents said the purchase was in keeping with much of the area's investment.

"The local market is definitely buying locally - even residentially. If the buyers are locals they'll probably just sit on it for 15 years and double their money," Mr Moss said.

While both Northcote Central and the Plaza appear to be in need of a major revamp, Mr Moss argues they help the High Street strip boasts "plenty of character".

"That's what makes Northcote unique compared with many other strips. It still retains its local community feel. It's not very commercialised."

Northcote Central's low yield is a reflection of both the under-let nature of the centre and the underlying development value of the land but shopping centre yields have been dropping all over Victoria.

CBRE research shows recent neighbourhood centre yields are averaging around 5.5 per cent. Both local and offshore investors are keenly pursuing the assets which are focused on non-discretionary spending.