Yields on fast-food outlets, childcare centres and petrol stations are expected to fall even further in 2022, as private investors seek to bolster their portfolios with trophy commercial property assets on long, secure leases to major national brands.
New data compiled by real estate firm Burgess Rawson, which sold over $1 billion of these assets at its popular portfolio auctions last year, show average yields on fast-food outlets leased to the likes of KFC and Hungry Jack’s tightened 69 basis points to just 4 per cent last year, as sales of these assets almost doubled.
Average yields on petrol stations fell 42 basis points to 5.31 per cent, while yields on childcare investments tumbled 121 basis points to 4.93 per cent.
Across all asset classes, yields tightened 61 basis points to 5.1 per cent, as Burgess Rawson racked up $1.78 billion of sales in 2021 across 364 transactions.
By comparison, the firm generated $574 million across 184 sales in the 2020 calendar year, when real estate activity was hit hard by lockdowns and restrictions.
“Demand for high-quality, defensive assets only grew [in 2021],” said Burgess Rawson managing director Ingrid Firmer.
Among the reasons for the record volume of sales in 2021, the real estate firm said, was the low cost of capital, strong interstate and offshore investor demand, an increasing number of residential investors seeking higher returns in commercial property and the growing popularity of “essential services” real estate.
Over the year, the most popular assets were fast-food outlets, medical centres, childcare centres, large-format retail and pubs.
Ms Firmer predicted a hot start to 2022 as Burgess Rawson prepares to offer 40 properties to investors next week at its 150th portfolio auction and first for 2022.
Included in the mix are three National Tiles showrooms in Melbourne offered in sale-and-leaseback deals by founder Frank Walker (best known for his long-running radio jingle). These are expected to sell for about $19 million combined.
Also up for grabs are three United Petroleum service stations.
“Over the past two years, investors have embraced a new way of purchasing and I believe that is here for the long term,” said Ms Firmer.
“Not only were investors comfortable bidding at auction via phone or online, but we also saw a high number of cross-border transactions and deals made sight unseen.
“Community lockdowns and restrictions did not deter investors who could not physically inspect a property. Instead, reputable tenants, secure leases, and the ability to trade through was too compelling. The confidence in essential service assets will prevail.”
Notable auction sales in 2021 included a Bunnings Warehouse in Plainland west of Brisbane, which sold for $22.2 million on a 4.21 per cent.
A Canberra Dan Murphy’s liquor store sold for $15.15 million on a 4.25 per cent yield while the Pimpama Central Tavern on the Gold Coast sold for $22.22 million on a 4.6 per cent yield.
Burgess Rawson said a notable trend in 2021 was the increased purchase of Queensland fast-food outlets by local investors.
They accounted for 80 per cent of the purchasers of these assets in 2021, up from 50 per cent in 2021.
Extracted from Commercial Real Estate