Investors undeterred by COVID lockdowns in ‘white hot’ commercial market

Investors have shrugged off COVID lockdowns at a $76 million auction, with a pub, Hungry Jack’s and Bridgestone tyre outlet setting records as buyers target commercial assets with long leases and strong tenants in a “white hot” market.

A record 300 registered bidders from across Australia lodged 738 bids during Burgess Rawson’s Melbourne portfolio auction on Tuesday, which was conducted remotely due to the city’s COVID lockdown.

Burgess Rawson national director Raoul Holderhead said the properties sold for a combined $76,516,000 – $7.9 million above reserve prices – and several record yields were achieved, despite many investors bidding sight unseen on properties due to COVID restrictions.

Mr Holderhead said demand was outstripping supply by a ratio of 12 to one.

“The market’s white hot and quality property is going to get super results,” Mr Holderhead said.

“I’ve been doing this for 20 years. I’ve never seen anything like it.”

While demand for essential service or “COVID-proof” properties has been at record levels, Mr Holderhead said the range on offer in Burgess Rawson’s portfolio auctions showed investors are targeting quality assets and tenants with a strong credit rating who are unlikely to default on their rent payments.

“At the end of the day, we’ve pretty much got what investors are after and that’s quality real estate, AAA tenants with super lease documents and long-term tenure.

“That’s what investors are after and that’s what the banks want to lend on.”

Service stations and other essential services have been in strong demand during the pandemic. Picture: Supplied by Burgess Rawson

Mr Holderhead said nearly all vendors and buyers were repeat clients of Burgess Rawson.

“Every property would have had bidding on it from people sight unseen and 13 or 14 were bought sight unseen, as they could not be inspected in person because of COVID,” he said.

Bidders from every state bid on properties located in Western Australia, South Australia, Victoria, Tasmania and Queensland.

Mr Holderhead said almost 10,100 people watched the auction online on Tuesday.

It followed Burgess Rawson’s Sydney portfolio auction a week earlier, when 16 of 18 properties sold for a combined $42.2 million in a remote auction during Greater Sydney’s prolonged lockdown.

A pub, Hungry Jack’s and Bridgestone set records

Headlining the results was an iconic pub in inner Brisbane’s Toowong, leased to Australia’s largest pub and hotel operator ALH Group.

The Royal Exchange Hotel sold for $14.05 million, more than $2.5 million above its reserve price.

Mr Holderhead said the 4.01% yield was a record yield for ALH investments. 

Thirty-six registered bidders across Australia vied for a Hungry Jack’s in the Melbourne suburb of Campbellfield.

It sold for $6,415,000 and set a new record yield for a metro Hungry Jack’s of 3.37%.

Fast food has become the most popular asset class among private investors targeting commercial property. Picture: realcommercial.com.au/for-sale

“What we’ve experienced in the last few months is that fast food has pretty much now overtaken the mantle as the most popular asset from servos,” Mr Holderhead said.

A property in Queensland’s Flagstone leased to Bridgestone attracted interest from 41 registered bidders, selling above reserve for $2.65 million.

Mr Holderhead said the 3.77% yield was a record for Bridgestone investments in Queensland.

A record yield was set with the sale of this Bridgestone outlet. Picture: realcommercial.com.au/for-sale

Three Bridgestone properties have been sold over the past 18 months with the previous record at 4.25%, he said.

Mr Holderhead said service stations remained hotly contested. The retail fuel assets – three Shell/Viva Energy investments in South Australia and Tasmania, and two United assets in Victoria – all sold for above reserve in the auction.

All of the five were sold for $3 million or more, with the highest price paid was $4 million for a United service station in Melbourne’s Braeside, on a 4.43% yield.

An AMA Group accident repair centre in Adelaide’s Para Hills fetched $5.38 million, which Mr Holderhead said was almost $1 million over reserve. Another in Perth’s Wangara sold for $4.3 million.

Five properties sold before auction day, including a property in Hobart’s Battery Point that is leased to the Kosaten Japanese restaurant. The ground-floor site in a historic sandstone building sold for an undisclosed price.

Burgess Rawson’s next portfolio auctions will be held on 21 and 22 September.