BWP Trust Rides High on Large Format Retail Momentum

The largest owner of Bunnings Warehouse sites in the country is benefitting from the continued momentum in large format retail. 

BWP Trust, which owns 68 Bunnings sites, reported to the ASX like-for-like rental growth of 3.3 per cent in the six months to December 31.

The weighted average lease expiry of the portfolio increased to 4.4 years, from 3.6 years in the comparable half in 2023, whilst occupancy increased 1.3 percentage points to 98.7 per cent. 

With nine lease options exercised, the only store that closed was the Northland large format retail site in Victoria. 

Wesfarmers-owned Bunnings has proven resilient in the face of rising cost-of-living headwinds. 

According to its parent company, Bunnings was its biggest earner in its last full financial year, returning just under $19 billion in revenue for the 12 months to June 2024, an increase of 2.3 per cent.

But the growth of Bunnings is just a drop in the bucket of large format retail (LFR) success. 

LFR was a major contributor to retail transaction volumes in 2024, which finished 14 per cent above the prior three-year average and 17 per cent above the 15-year average, according to JLL’s latest retail transaction volumes report.

The country had seen a “resurgence of optimism” driven by the renewed interest of local REITs and wholesale funds, it said. 

▲ LFR is seeing the emergence of a new “lifestyle” category, as well as hardware and furniture categories.

LFR rent growth was the highest in the retail sector, at 4.8 per cent, head of JLL Retail Investments Australia & New Zealand Sam Hatcher said. 

“As a result, owners of existing centres who are experiencing this growth within their portfolios continue to be the most dominant buyers in the market,” he said. 

“In a supply starved market, we expect rental growth will drive capital engagement leading to more demand and as a result will be the ultimate driver of yield compression in 2025.”

In fact, Barings acquired a $74-million large format retail centre near Perth in the biggest transaction for the subsector in 2024.

BWP Trust also told the ASX it had made “good progress” in repurposing stores that had been vacated by Bunnings, with development applications submitted and leasing campaigns progressing at the Northland site, Fountain Gate, also in Victoria, and Noarlunga in South Australia. 

Revenues reached $100.6 million, up 22 per cent on the same period the year before, experiencing an $18.1 million increase in rental income after acquiring Newmark Property REIT in 2024. 

BWP said it would continue to “optimise its portfolio” in 2025, reinvesting in its core retail portfolio “to support tenant optimisation plans”. 

It expects 73 leases to be reviewed to inflation or by a fixed percentage increase, and nine market rent reviews of Bunnings Warehouses are being finalised.