Unprecedented Demand Grips Sydney Metro Commercial Market
Kieran Bourke & Michael Gilbert
Demand for metro investments has hit unprecedented levels this year with no signs yet of slowing. Sentiments of grave uncertainty triggered when the pandemic began have been replaced by economic confidence with dramatic effects on commercial property. Listings of premium, highly sought-after properties – the kind that rarely come to market – are at unequalled volumes and investor interest is there to match. Enquiry rates are at historical highs and in some cases surpass the 100 mark as investors clamour for buying opportunities.
“This is an unprecedented time,” said Burgess Rawson associate director of sales Kieran Bourke. “Commercial property has never been this strong. We have never seen this level of enquiry and continuing yield compression.
“Investors are out in force as they recognise that many of the listings appearing now are seldom seen. The premium opportunities we are listing at present with corporate tenants could well be once-in-a-lifetime opportunities for buyers.”
Many factors support this unmatched momentum not least of which is Australia’s notably strong recovery from recession, record low interest rates and covid management. State and federal governments have thrown funding into fifth gear, focussing heavily on fast-tracking infrastructure and providing grants to stimulate economic growth.
Unemployment is on the way down and spending is up, latest ABS data showing a 1.1 per cent rise in retail purchases during April to $31 billion.[i] An accelerated uptake of e-commerce continues to create healthy demand for industrial space and warehousing. Spiking residential property prices – which in February rose at their fastest monthly rate in 17 years – has seen traditional investors in the sector shift their attention to commercial options, many for the first time, in pursuit of greater yields.
Offshore investors are also liking the look of Australia and its capital city markets more than ever. The combination of economic stability, favourable lending rates, good yields and management of covid numbers have made the country enormously appealing when so many major centres continue to battle the pandemic.
Enthusiastic bidding for the quality listings offered at Burgess Rawson’s most recent auction in May reflected the upbeat sentiment that this combination of positive economic factors is creating. So keen were buyers to secure rare opportunities two of the 12 properties offered sold minutes prior to auction. Once proceedings got underway, spirited bidding was the order of the day resulting in the sale of $31.376 million worth of commercial assets at a 91% clearance rate.
A rare opportunity was a Sydney site occupied by premium real estate agency LJ Hooker Atlas. It sold under the hammer in well under 10 minutes for an impressive $4.28 million to become the auction’s highest sale in NSW.
The draw of an A-grade tenant combined with a coveted location in prestige Neutral Bay seven minutes to the CBD and frontage to busy thoroughfare Military Road CBD created an irresistible package said selling agent Kieran Bourke.
“Residential real estate is on fire right now which meant buyers that lined up for this property knew they were looking at a rock-solid tenancy,” Mr Bourke said. “The fact that this is LJ Hooker’s premium agency offering cemented investor confidence. The fit-out is also exceptional.”
The hottest listing came in the form of a 1708sqm development site on the Prospect Highway at Seven Hills site. It sold for $3.101 million after more than 50 fast-paced bids. Over 100 inquiries flooded the campaign and over 20 contracts issued.
Flanked by fast food outlets either side (unsurprisingly the underbidder was major fast food chain Oporto) the site was also ideal for childcare, retail, commercial or industrial uses and came with a handy slip road.
“The reaction triggered by this listing shows just how rarely opportunities arise to purchase such ideal development sites like this in Sydney,” said Mr Bourke.
Previously home to a car wash, the site has proximity to such conveniences as a train station with over 1000 car parking spaces, a significant five-way intersection, major shopping centres and motorways.
Benefits galore as well as a premium corporate tenant marked a Pizza Hut in Sydney’s inner-city Waterloo as another golden opportunity rarely offered to investors. The coveted asset drew enthusiastic bidding to sell for $2.56 million on an extremely low yield of 4.99%. Unique for its flagship property status, the restaurant has a liquor license and fell in the popular $2 million to $2.5 million range. Other drawcards included a 10-year parent company lease to October 2027 with options to 2032 and fixed 3.75% annual increases. A location in a burgeoning inner-city area surrounded by over 200,000 residents within a 3km radius capped off the stellar investment.
“The buyer couldn’t pass up the opportunity of securing a slice of Sydney’s inner-city and is very happy with their purchase,” said Burgess Rawson sales director Michael Gilbert.
Listings and inquiry levels for Burgess Rawson’s upcoming June auction are similarly buoyant. Among assets going under the hammer on June 22 at the Yallamundi Rooms at Sydney Opera House is a highly visible corner site in western Sydney’s Windsor tenanted by fast food giant Subway since the building was completed 15 years ago. Listed by Mr Bourke and Burgess Rawson managing director Dean Venturato, the site’s location on a major thoroughfare is the icing on a cake comprising a renewed lease to November 15, 2026 with a 5-year option, net income of $51,379pa + GST and on-site parking for no less than 23 cars.
Mr Bourke also has listed for the June 22 auction an immaculate retail premises located in the inner western Sydney suburb of Dulwich Hill. The 539sqm property is occupied by two quality established tenants – successful catering business and restaurant Tony’s Table and design/construction specialists Home Impact – and located on major arterial Canterbury Road. Other features are a rooftop area, 13 car spaces, an exclusive lift for retail and income from telco installations as well as a total net income of $256,356 + GST.
Contact Kieran Bourke 0417 418 007 or Michael Gilbert 0430 024 790