Demand steady on premium assets
Buyer numbers were down at Burgess Rawson’s end-of-financial-year portfolio auction, but ongoing confidence in commercial properties with favourable lease terms and solid tenants led to surprisingly strong results. Essential service assets such as petrol stations and childcare centres scored the highest sales across three events in Sydney, Melbourne and Brisbane, while new buyers to the commercial
space sought more affordable assets with strong income streams.
Private domestic buyers dominated the auctions, which saw a clearance rate of 82.5 per cent and 33 properties sell for a combined $199.77m on a blended yield of 5.52 per cent. By comparison, Burgess Rawson’s May auctions saw a clearance rate of 81.4 per cent with 35 properties achieving $130.28m on a blended yield of 5.16 per cent. The March auctions saw a clearance rate of 84.1 per cent, when 53 properties sold for a combined $186.41m on an average yield of 5.02 per cent.
National partner at Burgess Rawson Raoul Holderhead said he was stoked by the results given recent interest rate rises, which had seen buyer registrations reduce by around 30 to 40 per cent. “The market has been good for so long, and this was a real test. But when we look at these results we can still see a lot of buyer confidence. Quite a few agents were shaking their heads.” There was a slew of surprising results, with demand driven by rental incomes not achievable in residential property. Ferguson Plarre Bakery in Epping, north of Melbourne, passed a reserve of $1m to sell for $1.26m on a yield of 4.29 per cent after nine buyers made 101 bids.
“Not a single person saw that coming. It was a new development with a new lease to a well-known Melbourne name,” Mr Holderhead said. Investors fresh to the commercial space also fought for established Asian noodle bar Noodle Mas in Wangaratta, Victoria, which sold for $686,000 on a yield of 4.99 per cent. Meanwhile, new swimming facility King Swim, also in Epping, secured one of Melbourne’s highest sales of $5.8m on a yield of 5.52 per cent.
The biggest surprise in Sydney was an office asset in Gosford’s CBD leased to accounting firm RSM Australia and legal practice Kent Law Group, which sold for $5.06m, more than $1m over reserve, on a yield of 4.95 per cent. Childcare centres continued to secure solid sales, with an anticipated new Labor policy to relieve childcare costs expected to boost the sector. Five childcare centres sold across the three days. Seven service stations also sold, with a 7-Eleven in East Brisbane achieving the highest price of $7.12m on a yield of 4.91 per cent.