Rural Bunnings Leads the Charge at Burgess Rawson Portfolio Auction

More than $130 million worth of commercial properties sold under the hammer over three days at Burgess Rawson’s portfolio auction event, achieving a blended yield of 5.17 % from 35 sales.

A regional Bunnings store, a suburban Melbourne gym and a Victorian petrol station were among the standout performers, with just 8 of 43 properties failing to achieve a successful bid at the third portfolio auction of the year, which were held in Brisbane, Sydney and Melbourne.

The highest price achieved at the auction was $16,202,000 for a new Bunnings store in Mt Isa, Queensland, on a yield of 4.29 %. It was sold to a private investor from New Zealand. Set on a 15,430 sqm landholding, with a net income of $695,000 per annum and a brand new 10 year lease, the Bunnings store opened in February and was five times the size of the town’s previous Bunnings warehouse. Campbell Bowers, Burgess Rawson Queensland partner and joint head of agency, said a couple of the handful of bidders – who were mostly high net-worth private domestic capital investors – had other Bunnings investments and were well- known investors in the sector.

“It was a new one – a sale and lease back from Bunnings, they built it themselves to their very high standard, and put the lease in place and the selling of the property, which is something they do pretty regularly. It was a brand new building,” he said.

Mr Bowers said a large amount of capital had been coming from Sydney and Melbourne into Queensland since the pandemic, and the Bunnings Mt Isa sale was another example of the trend of regional Queensland investments performing strongly.

“I think it’s an extremely positive outlook for Queensland. We are having a lot of investors, who have large landholdings in both Sydney and Melbourne, starting to look more and more up here.”

Scott O’Neill, director of commercial property buyers’ agency Rethink Investing and Rethink Financing, said a 4.29% yield was an incredible result.

“For Mt Isa, that should sell at probably a 7% plus yield, for someone to come in at that price, they’ve almost paid like 50% over in real terms,” he said.

“And the reason they’ve paid so high is because it is a Bunnings. And Bunnings is viewed as a defensive asset which performed well in Covid, and it performed well in up markets and down markets.

“It’s a good all-round tenant, and obviously with a long lease it would have made someone warm and fuzzy inside to the point they paid way too much for it.”

PropTrack economist Anne Flaherty said assets like Bunnings have consistently performed extremely well but since the onset of the pandemic there has been a growing interest in assets like Bunnings, which were viewed as a cultural icon

“It is seen as a safe, reliable tenant, they are very popular with consumers, and they have a good growth outlook,” she said.

“So, from an investor perspective, getting an asset with a Bunnings in it, it’s not just appealing from the sense of having a high quality tenant, but it’s also appealing from the sense of owning an asset that’s housing one of Australia’s iconic brands.”

Gym attracted keen interest

Meanwhile, a gym in Noble Park achieved an impressive yield of 3.76% after selling for $6.75 million.

The 5779 sqm land holding – which is home to In2Performance gym and had a 10 year lease plus options to 2032 – attracted strong interest from the outset, Burgess Rawson partner Shaun Venables said.

“It was educating buyers straight away that this wasn’t a yield play, this was about land value at replacement costs. I think obviously they’re not building any more land and to get a site of that size in that location was always going to be an opportunity,” he said.

Good hedge against inflation

Ms Flaherty said investing in commercial property could offer a relatively good hedge against inflation.

“And the fact that we are seeing such high headline inflation figures could be driving more investors to consider commercial property,” she said.

“One of the reasons for that is commercial leases are typically multi-year and they are very often pegged to inflation. So yearly rent increases that are going to equal whatever inflation is. So, I think that in the current environment that could be supporting demand for commercial property.”