An investor snapped up a Townsville service station on a yield of 6.25 per cent in a commercial property auction days after the Reserve Bank of Australia last week slashed interest rates to near zero in a series of moves that also pumped money into the economy.
The Woolworths Caltex-branded servo was one of six in a portfolio of fuel and convenience assets across NSW, Queensland and Northern Territory that wealthy investors and funds bought under the hammer on yields ranging from 3.71 per cent up to the Townsville property’s 6.25 per cent in Cushman & Wakefield’s Sydney portfolio auction on Thursday.
A seventh service station remained under negotiation on Tuesday.
“The fuel and retail convenience sector continues to run hot,” Cushman & Wakefield’s head of national investment sales Michael Collins said.
“With an overwhelming level of interest in the portfolio, and a large number of active bidders, these assets set the pace for a very competitive auction.”
The sales followed the Reserve Bank’s unprecedented step to formalise quantitative easing by pumping money into the economy through government bond purchases, as well as a separate reduction in the benchmark cash rate to 0.1 per cent.
The auction with a 73 per cent clearance rate shows one effect of record-low borrowing costs – they make commercial assets with guaranteed returns more attractive.
“Private and high-net-worth investors have continued their active search for yield during the pandemic and are targeting defensive investment opportunities backed by high-quality, long-term leases,” Mr Collins said.
“The low yields recorded across many sites reinforced the yield compression we are seeing among these types of assets and [are] reflective of the lower-for-longer interest rate environment.”
The six service stations selling for a total of $40.2 million made up the bulk of the auction’s $53.6 million sale of commercial properties. A further five sites holding childcare centres, a hairdresser, a dentist and a baker accounted for the remaining sales.
The strongest result came with the $8.9 million paid for a service station at 400 Parramatta Road, in Sydney’s inner-west suburb of Burwood, pushing the yield down to 3.71 per cent, which Mr Collins called a “near record”. A service station in Chatswood sold on a 4.29 per cent yield and one in Byron Bay on a 4.41 per cent yield.
A service station in Brisbane’s Bowen Hills sold on a 5.96 per cent yield, while one in Bakewell in the Darwin satellite city of Palmerston sold on a 6.11 per cent yield.
Extracted from AFR