COVID drives booming private investor demand for commercial assets

Private investors are scrambling to secure essential services properties able to trade during COVID-19 lockdowns, ahead of a $65 million portfolio auction.

Hundreds of investors have expressed interest in the 12 properties Cushman & Wakefield has up for auction next week as buyers chase assets with long leases and strong tenants.

Cushman & Wakefield head of national investment sales Michael Collins said there has been a boom in the private commercial investment market over the past nine months and it is gaining further momentum.

“Inquiry levels are outpacing previous campaigns, and we’re seeing an unusual amount of early offers as investors try to get ahead of feverish auctions to secure property,” Mr Collins said.

Cushman & Wakefield’s national investment sales team has fielded 889 enquiries about the 12 properties, with that number expected to surpass 1000 by auction day on Wednesday 28 July.

There have been 161 requests for contracts, the agency said.

“Inquiry levels are outpacing previous campaigns, and we’re seeing an unusual amount of early offers as investors try to get ahead of feverish auctions to secure property,” Mr Collins said.

A Tranzmile truck and trailer parts showroom in the rural Queensland town of Kingaroy sold pre-auction for an undisclosed amount.

The auction portfolio includes petrol stations, childcare centres, medical assets and retail properties, mainly located in Queensland but also in New South Wales and Victoria.

A service station in Toowoomba has the highest price tag in the auction. Picture: Supplied by Cushman & Wakefield

The properties’ expected values range from $2 million for a childcare centre in Queensland’s Lockyer Valley to more than $10 million for an Ampol/Caltex service station with a Red Rooster outlet in Toowoomba.

The agents said the forecast yields average 5.66%.

“Alternative commercial properties are trading on sharper yields as records continue to fall across asset types and locations,” Mr Collins said.

“That’s being driven by yield-hungry investors attracted to strong, long-term leasing covenants in sectors that continue to trade even in spite of lockdown orders.”

Buyers have been targeting “pandemic-proof” essential service businesses able to remain open throughout pandemic restrictions, such as childcare, supermarkets, service stations and fast food.

“Service stations have benefitted significantly from the uplift in regional travel and that’s expected to continue,” Mr Collins said.

“Population growth and ongoing government support bode well for the childcare sector, and well-positioned fringe and metropolitan fast-food assets rarely come to market and when they do, we are seeing record prices paid to acquire them.” 

This Brisbane childcare centre has a price guide of more than $6,5 million. Picture: Supplied by Cushman & Wakefield

Four Queensland childcare properties are up for auction including a centre with a 15-year lease to G8 Education in the Brisbane suburb of Morningside that is expected to sell for more than $6.5 million.

There is also a new Arana Hills centre with a 15-year lease to Kids Club that has a price guide of more than $5 million, equating to a yield of 5.5%.

The fuel and convenience retail properties are expected to attract strong interest, as COVID fuels investor demand for service stations.

A United service station in Melbourne’s Altona North is expected to sell for about $8.5 million, another United-leased petrol station in Brisbane’s Coopers Plains for about $7.9 million and a third in Sydney’s Terrey Hills for $7 million.

COVID has fuelled investor demand for service stations like this one in Melbourne’s Altona North. Picture: realcommercial.com.au/for-sale

A Wollongong property in NSW that is leased to boating, camping and fishing retailer BCF and the Domino’s pizza chain has a $7 million price tag, while Cushman & Wakefield expected a Malt Traders liquor store in the Brisbane CBD to be hotly contested.

Wednesday’s auction will be conducted online due to Sydney’s lockdown restrictions, with a connection to a remote bidding room in Brisbane.