This article is from the Australian Property Journal archive
COMMERCIAL property investors picked more than $50 million worth of assets ranging from cafes and medical centres through to offices and warehouses at yesterday’s Melbourne Burgess Rawson auction.
Twenty-two properties were offered at Crown Casino and 20 sold under the hammer for a 91% clearance rate.
Coffee shops in Melbourne achieved the tightest yields of the day. One investor forked out $1.155 million for a Latte Road drive-through café in the growth suburb of Wollert on a 4.13% yield, while the $1.77 million of the Kofi Beans café in Croydon represented a 4.37% return.
Not far behind was an ice cream shop in Epping, which sold for $910,000 at 4.40%.
The Hallet Cove office of South Australian Opposition Leader David Spiers sold for $1.235 million at 4.89%. The Pakenham Fruit & Veg Market also achieved a sub-5% yield, selling for $1,705,000 at 4.61%, as did a MyCar Tyre & Auto in Hastings, the Glen Waverley Specialist Medical Centre, and an Epping liquor store.
The average yield was 5.12%.
“Since our July portfolio auction, interest rates have increased 100 basis points, yet our average yield has decreased 36 basis points, and this is an incredible show of confidence in the market,” Burgess Rawson’s Shaun Venables.
“Not everyone is borrowing and if it’s investors, it’s generally only 50 to 60% of the purchase price, so the impact of rising interest rates is felt less keenly.”
The weighted average lease expiry of the properties sold at auction was 7.3 years.
“Investors are redirecting their capital from the volatility of other investment classes and turning to fundamentally sound, passive investments, just as we’ve seen in previous market cycles,” Venables said.
“It’s a flight to quality and investors are placing a high value on long-term lease profiles.”
An IGA Supermarket in East Albury fetched the biggest price of the day, selling for $7.01 million at 6.23%. Metcash has a renewed seven-year lease plus options over the 1,534 sqm store, rebuilt in 2014 on a 3,509 sqm site.
A brand new childcare centre with a 15-year lease to Hei Schools sold for $5.98 million, on a 5.79% return, while a Busy Bees facility in Carrum Downs with a 20-year lease plus options sold for $5.4 million at 5.56%.
Yosh Mendis, Burgess Rawson’s head of agency NSW said that while registered bidding numbers were lower than previous months, it was a case of “quality over quantity”.
“The market has seen some change, but we’re seeing consistent demand for particular asset types, especially in the essential services sectors, such as childcare, service stations, fast food, non-discretionary retail and government leased investments.”
Also selling was a 560 sqm Australia Post warehouse in South Australia’s Whyalla fetched $986,000, representing a 5.50% yield, while a Mildura facility leased to San Miguel Corporation for $5,075,000 for a similar return. In Shepparton, a Stubbs Wallace warehouse and office sold on a 6.56% return, for $1,853,000.
