Essential services a lock for investors as confidence returns

Investors looking for certainty and good returns as the country emerges from extended COVID lockdowns are turning their attention to essential services in the suburbs.

Recent sales activity and a surge in demand for “recession-proof” properties such as childcare, fuel, fast food, medical, industrial and large format retail are filling sellers and buyers with confidence.

REA Group economist Anne Flaherty said there was definitely increasing demand for “recession-proof” properties such as service centres.

“Increased risk causes investors to rethink their assets,” she said. “Investors are looking for a steady income stream and petrol stations are attractive as they are a need.”

Ms Flaherty said listings with realcommercial.com.au had increased over the past 12 months across all asset classes.

“Properties with good tenants in place that are less impacted by lockdowns are in extremely high demand,” she said.

These assets include childcare, fuel, fast food, medical, industrial and large format retail.

The proof is in the sales results.

Cushman & Wakefield recorded its strongest portfolio auction in history in September, which proved intense demand remains for assets housing COVID-proof tenants.

There was fierce competition for essential services such as childcare centres, fast-food outlets and healthcare properties. Collectively investors snapped up $43.8 million worth of assets, which sold for about $4.6 million above reserves with a 100% clearance rate.

Burgess Rawson had similar outcomes with its September portfolio auctions, which performed “well beyond our wildest expectations”.

The company is confident its next line-up of properties to go to auction over three days this month will surpass the September results.

The sale is packed with recession-proof assets including childcare centres, service stations, medical centres and fast-food restaurants.

There are 68 properties on sale headlined by brands such as KFC, Coles, Woolworths, Dan Murphy’s, Liquorland, Ikea, Viva Energy and Kmart. Prices range from $550,000 to about $60 million.

National head of agency Adam Thomas told realcommercial.com.au the auctions could surpass Burgess Rawson’s record-breaking September events, in which 49 properties changed hands for a combined value of $189 million on a blended yield of 4.70%.

“Confidence is at an all-time high and investors continue to focus on secure, long-term investment leased by the government or an essential service tenant,” Mr Thomas said.

Knight Frank chief economist Ben Burston told realcommercial.com.au the outlook is positive now that lockdowns are easing.

He said confidence is picking up and this will drive an acceleration in deal activity over the next 12 months.

“Investors are keen to secure assets now to take advantage of the recovery,” he said.