Investors flock to commercial property as Portfolio Auctions resume

Commercial property investors have shown their readiness to jump back into the market in the wake of the COVID-19, with 13 properties sold at Burgess Rawson’s first auction since the pandemic reached Australia.

Only two properties went unsold at the auction event on Wednesday, for a clearance rate of 87%, with yields plummeting below 5% and 6% as buyers sought freestanding and single-tenanted properties that have continued to trade throughout the lockdown period.

Almost $47 million worth of property changed hands at the auction, led by a Hungry Jack’s restaurant in Cairns, which sold for $5.21 million on a yield of 4.77%.

Another Hungry Jack’s at Wangaratta in regional Victoria sold for $2.005 million on a 5.46% yield, while a beachside building leased to a veterinary clinic at Rye on Melbourne’s Mornington Peninsula was bought for $1.15 million on a 5.18% yield.

The Rye veterinary clinic.

Burgess Rawson director Raoul Holderhead says unfulfilled demand from a wide range of investor types fuelled the strong results.

“While we had the usual property people such as investors from mainland China, developers and fund managers, the winners of the day were a diverse mix of private investors,” Holderhead says.

“This included a plumber, telecommunications consultant, sky diver, retired retailer and a sugar cane farmer which is really encouraging for the market, indicating commercial property is widely seen as a solid investment.”

With auction room numbers restricted due to social distancing, much of the bidding came from off-site or interstate.

But buyers weren’t deterred, with childcare centres and service stations also selling strongly.

It was a very different looking Burgess Rawson Portfolio Auction.

Three childcare centres sold for a combined $17.277 million, with centres in Epping and Werribee selling on a blended yield of 5.92%, while three fuel sites – a 7-Eleven, Viva and Ampol – sold for a combined $13.52 million.

Burgess Rawson’s Brisbane director Glenn Conridge says the landmark Hungry Jack’s sale was an indication of the strong selling conditions.

“Our vendor was strategic in their decision to sell into this market,” Conridge says.

“It was a perfect storm with low interest rates, a limited supply in the market and investors ready to buy. Our vendor was very smart, saw an opportunity and it paid off today.”