Why Australia’s love affair with property is turning commercial
As Australia’s median house price edges closer to $1 million, a growing tide of investors are shifting their focus to the commercial property sector.
Curious? You’re not alone. Especially with commercial property delivering the highest returns of any property sector in the country.
One of the industry’s most respected commercial advisors, Ingrid Filmer, CEO at Burgess Rawson, says it’s a shift that is paying dividends for those who have dipped a toe in the world of long-term, ‘set and forget’ leases.
“The Australian dream of home ownership is as strong as it ever was, however as an investment portfolio goes, residential property pales in comparison to the commercial sector,” Ms Filmer said.
“There seems to be a widespread misconception that commercial property investment is for the ultra-wealthy, or those with a technical understanding of a particular commercial sector, which couldn’t be further from the truth.
“Some of the best-performing assets sit between the $500,000 and $1 million bracket, where a good quality investment can return $30,000-60,000 per annum.
“These price points are ideal for investors seeking an alternative to the overheated residential market.”
Ms Filmer said ‘frustrated capital’ stagnating in near-zero interest bank accounts, or inflated residential property markets, is now being channelled into high-performing childcare centres, fast-food retail and service stations.
“Earlier this month, we auctioned a takeaway shop in Altona, Victoria for $760,000 to a mum and dad investor from Caulfield,” she said.
“The property was purchased at 31% less than the average home price in that suburb of $1.1 million, and will return a yield of 4.06% – or $30,900 – per year over the course of the 7-year lease.”
Ms Filmer said the COVID pandemic has revealed the most stable and sought-after commercial properties are those classed as ‘essential service’ assets.
“Essential service assets are those that are able to operate at all times, even during lockdowns, and typically demonstrate a high level of resilience to market cycles such as childcare centres, medical centres and service stations,” she said.
“These properties generally enjoy long-term lease arrangements of between three and five years and the tenants are responsible for all outgoings, repairs and improvements.”
Ms Filmer says this is where commercial properties have an enormous advantage over residential investment, where leases are generally renewed every six to twelve months and the owner is responsible for all outgoings, maintenance, and repairs.
Her tips? Start small, stick with resilient asset classes, and observe the auctions.
“Each month, we have about 5,000 investors dialling in, or attending, our live-stream portfolio auctions in Brisbane, Sydney and Melbourne,” Ms Filmer said.
“As with all investments, it’s important to first get the right financial advice and consider what’s best for you and your own personal circumstances.”
Burgess Rawson is Australia’s premier commercial property agency and holds investment auctions every six weeks with properties typically ranging in value from $500,000 to $20 million.
The February three-day auction event will be hosted in Sydney on Tuesday 22 February, Melbourne on Wednesday 23 February, and Brisbane on Thursday 24 February 2022.
Bidding will be available online, via phone or in-person. Click here for further details.