Investors Flock To Essential Services

Investor demand for essential services properties remains at record levels despite Greater Sydney’s prolonged coronavirus lockdown, with buyers snapping up more than $90m in “Covid-proof” assets at auction.

There was strong competition for petrol stations, childcare centres, fast food assets and medical properties in Burgess Rawson and Cushman & Wakefield’s recent portfolio auctions, despite them being conducted remotely due to the lockdown.

Burgess Rawson director Darren Beehag said the pandemic had boosted demand for essential services assets, as investors targeted businesses able to trade through lockdowns and Covid restrictions. “The market is as strong as we’ve ever seen it right now,” he said.

Mr Beehag added that the strength was across essential services assets such as childcare, service stations, medical, fast food and government-leased properties.

“Some of those uses we used to call recession proof, now we’re saying they’re not only recession proof but they’re Covid proof,” Mr Beehag said.

“The market’s really gravitated towards those investments because they’re seen as a safe haven, and they’re willing to pay a premium to secure them.”

Sixteen of 18 properties sold for a combined $42.2m as part of Burgess Rawson’s Sydney portfolio auction, including seven that were sold before auction day.

Lockdowns were no obstacle to Tuesday‘s auctions in Sydney and Melbourne. Twenty-three out of 28 properties sold for a combined value of $76.516m.

There was an 82 per cent success rate and properties sold for 12 per cent above reserve with the firm saying demand was outstripping supply at a ratio of ten to one. Ten of 12 assets sold for a total of $51.5m at Cushman & Wakefield’s national portfolio auction that was conducted online on July 28.

Mr Beehag noted there has been yield compression for essential services throughout 2021. The pandemic had fuelled demand for fuel and retail convenience offerings. A United service station in Tamworth, NSW, sold for $5.02m on a yield of 4.73 per cent, while a KFC in the regional NSW town of Tumut went for $2.63m on a yield of 4.39 per cent