Bendigo commercial property market heats up as investors chase bigger yields

A Bendigo building tenanted by Australia Post, sold for $6.375 million this week in a competitive auction that saw a Melbourne investor win-out against a local bidder.

Selling agent and director of Burgess Rawson Jamie Perlinger said the sale price of the Williamson St property underscored the ongoing strength of Bendigo’s commercial market.

“Investors are looking for growth and properties in well-established regional cities – and this one ticks all the boxes,” he said.

Australia Post operates a large retail store, 1500 PO boxes and 24.7 parcel lockers in the CBD property. The other tenant, Millson Business Centre, leases private office space and has over 90% occupancy.

The two-level, 1222sqm building was refurbished in 2016 to the tune of $2.5million.

The property also includes office space. Picture: realcommercial.com.au/sold

Mr Perlinger said commercial properties in Bendigo’s CBD benefitted from a hub of government investment projects, including a $60 million redevelopment of the TAFE building, a $90 million Gov Hub which will employ 1000 people and a $160 million redevelopment of the local law courts.

Investors could expect between 4.5% and 6% return on commercial property in Bendigo, he said.

“It’s a strong regional city and it’s been growing rapidly, especially since COVID, when we have seen major residential development happening as well.”

Earlier this month the Australian Bureau of Statistics revealed a net 43,000 Australians moved to regional areas from capital cities in 2020, the largest net inflow to the regions on record.

In the year to April 2021 median house prices in Bendigo rose by 17.5% and commercial property searches for the city rose 14.1% in 2020, according to REA Group data. Searches for commercial property in Ballarat rose by 11.1%  over the same period.

REA Group economist Anne Flaherty said the regional residential property boom that kicked off during the pandemic, was definitely having a flow-on effect on regional commercial property.

“When you see strong population growth in regional areas that sees an increase in foot-traffic, it’s good news for the retail sector, the child care sector and the office sector, because you have more people and more businesses looking for commercial space,” she explained.

Recent commercial sales in the City of Bendigo have reflected the interest of interstate investors in Victoria’s fourth largest city.

In December a Melbourne investor bought 46-48 Edward St for $4.01 million through Tweed Sutherland First National.

This commercial property in Bendigo sold for $4.01 million in December. Picture: realcommercial.com.au/sold

In January, a commercial building overlooking the city’s landmark Alexandra fountain was sold to a Melbourne investor for just under the asking price of $1.4 million. The building, at the corner of Pall Mall and Mitchell streets, had two tenancies and 545sqm floorspace.

Selling agent Jeremy Brown from McKean McGregor Real Estate, said he had no doubt the city would continue to attract interstate buyers, but currently it was a case of demand outstripping supply.

“We have a client who sees plenty of scope in Bendigo and is likely to make further acquisitions,” he told realcommercial.com.au, adding that with yields tightening in the capital city markets investors would find greater value in Bendigo’s commercial property market.

This week a major commercial site at 267 Lyttleton Terrace and 49-55 Williamson St sold to a Melbourne developer for $6.75 million, with a 5% yield, after land tax.  The property had a reserve price of $4.75 million. The property has seven tenancies, including national retailers Endota Spa, Aplifon, AMP and The Complete Garden.

Stonebridge Property Group’s agents Nic Hage, Rorey James and Kevin Tong managed the sale.

Mr Hage told realcommercial.com.au interest in the property had been “very strong” with 130 groups reviewing the property and nine formal positions.

“A broad range of interest was received with groups from Tasmania, Sydney, mainland China, Bendigo and Melbourne submitting positions,” he said.

“Demand or regional investments has substantially increased over the past nine months,” added Mr James.

“This has been driven heavily by a population shift from metro Melbourne to regional areas, and also the available 50% stamp duty concession that is currently being offered.”

Ms Flaherty said commercial buildings in regional cities that had national retailers or state or federal government bodies as tenants made for more secure investments.

“One advantage of having a government tenant is that the vacancy risk is much lower. So typically, in regional areas, you don’t have the diversity of tenancy mix that you may get in an area close to the city, so if there is a shock to a specific industry, that can spell bad news for a commercial landlord,” she said.

“However, tenants like the government or a national retailer have longer lease terms and tend to be a reliable source of income, so they are lower risk.

“Businesses like Coles and Woolworths are great tenants to secure as well, as again they are a lower risk tenant. And they are a drawcard to bringing people into an area. So, if for example you have a commercial property that is close to a Coles or a Woolworths, that’s going to increase the foot traffic to your property so that’s going to make your property more in-demand for prospective tenants.”