Investors’ appetite for fast food properties drives yields lower

A voracious appetite for fast food pushed the yield on a Hungry Jack’s in northern Victoria’s Wodonga down to 4.98 per cent in Burgess Rawson’s commercial property auctions on Wednesday.

The low-growth, low-interest rate environment is pushing money into assets such as commercial real estate, driving yields lower.

The 2507 sq m corner site with a new 12-year lease (with options to 2041) to the fast-food operator sold for $4 million, well above the guide price of $3.65 million, showing demand for a food and beverage asset expected to do well in a low-wage, low-growth environment.

“It’s a very popular asset class,” Burgess Rawson director Shaun Venables said.

“Regardless of what the economy’s doing, people love their fast food and the convenience of it all. And it’s affordable. In a tough economic climate they can even trade better than normal.”

The Hungry Jack’s in northern Victoria’s Wodonga sold for $4 million on a yield of 4.98 per cent.

The site with 109 metres of street frontage and drive-through facility was one of 11 properties to trade in the agency’s latest Victorian auction out of 13 up for grabs. Three sites were sold prior in sales which, like a day earlier in Sydney, showed mum-and-dad investors full of enthusiasm for commercial property over residential and shares.

Investor demand has returned for child care properties, with two in Leopold and Grovedale outside Geelong and another two at Southport on the Gold Coast and Ashgrove in Brisbane up for grabs in Wednesday’s portfolio auction.

The Leopold centre sold for $4.79 million on a yield of 6.17 per cent, which marked a return to tighter yields after a spate of softness, Mr Venables said.

“It’s back in vogue,” he said.

The Woolworths and Caltex-branded petrol station at 110 Humffray Street South, Ballarat Central, sold on a 5.24 per cent yield.

Appetite for petrol stations was mixed. Two of the four petrol stations up for grabs sold on Wednesday including one in Ballarat for $955,000 on a yield of 5.24 per cent. Two others, in Bendigo and Maryborough near Hervey Bay in Queensland, passed in.

A 10-year-old office complex leased to accountancy firm Findex in Colac, roughly half-way between Geelong and Warrnambool on the Princes Highway, was the biggest-ticket property, selling for $6,050,000 on a yield of 7.4 per cent. This was just above the guide of $6 million and 7.4 per cent.

The building on a 5963 sq m site, opposite Colac’s new Coles Plaza shopping centre was well-located in a regional centre that not only drew its own population but people from a catchment area that extended all the way south to the Great Ocean Road, Mr Venables said.

“Your local people in Lorne don’t go and pay holiday prices,” he said. “They drive up to Colac and go to the Woolworths and Coles like everybody else.”

Credit – Larry Schlesinger, Australian Financial Review

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