Fast food outlets top of the menu for Queensland buyers hungry for resilient assets
Fast food was at the top of the menu for commercial property investors in Queensland this week, with buyers gobbling up assets that have proved resilient through the pandemic.
The big take-away from Burgess Rawson’s December portfolio auctions across Melbourne, Sydney and Brisbane was the insatiable hunger for fast food businesses, especially those with drive-throughs, which came into their own in the past two years as Australians looked to minimise physical interaction because of Covid.
Burgess Rawson partner Billy Holderhead said the sale of Guzman y Gomez in Pialba in Hervey Bay for $4.93 million with a yield of 3.92%, Taco Bell in Townsville for $4.41 million with a yield of 3.94% and a Domino’s in Rockhampton for $1.38 million with a 4.03% yield continued a trend that’s been seen for several years.
“Fast food outlets have absolutely killed it throughout the pandemic so it was no surprise to see strong competition for these assets.
“You only have to think about McDonald’s moving to sell bread and milk at the drive-through during lockdowns to understand why they became important to Australians and desirable to commercial property investors,” he said.
The Guzman y Gomez outlet went for 12% above reserve and the Taco Bell 10% above, while there was 15 to 16 bidders for the Domino’s in the regional city of Rockhampton, which was one of the more affordable assets in the portfolio auction.
“Yields in the fast food space have come down to record levels, despite a 93% increase in supply. Last year, we had just 11 sales, totalling $49 million, with a 4.69% average yield, while this year, we’ve had 21 sales, worth $94.6 million – but the yield is hovering at 4.02%.
“We believe we’ve just scratched the surface of this phenomenon. We expect the popularity of this asset class to continue … 110%,” Mr Holderhead said.
REA economist Anne Flaherty said the location of several of the fast food assets sold in the auction was notable “Fast food is a popular class already, but those found in regional locations, in smaller towns, are appealing as there often isn’t as much competition,” she said.
As it is for customers, brand awareness is also key in the fast food space, Ms Flaherty said. “From an investors’ perspective, a well-known brand offers something familiar, that they already understand.”
The other standout sector in the auction was childcare, which again proved popular, with 11 sales totalling $80.75 million.
Bridge Street Kids Childcare in the Sydney suburb of Hurstville went for $4.02 million with a yield of 3.93%, Only About Children in the Melbourne suburb of Brunswick West sold for $13.16 million with a 4.09% yield and Advance Childcare in Hadfield in Melbourne sold for $11.10 million with a yield of 4.56%.
“Childcare, like fast food, has proved incredibly robust through Covid. It offers long-term leases, relatively speaking when compared to other asset classes in the same price range, so from an affordability standpoint they appeal to a big range of investors.
“They are a ‘set and forget’ asset that has seen off the very worst of economic conditions in recent years. And with the government continuing to throw money at the sector – in recognition of how important it is to the overall economy – investor confidence is high,” Mr Holderhead said.
Burgess Rawson’s December portfolio auctions saw a total of 51 of 62 properties sold across the three states, for a combined total of just over $190 million, with a clearance rate of 82%. Only four properties remain unsold in Sydney and three each in the Melbourne and Brisbane auctions.