Fast-Food Investments: Recession Proof, COVID Proof

The record-breaking sale of a tiny KFC restaurant in regional New South Wales has again underscored fast food’s status as Australia’s most iron-clad commercial property asset class.

The longstanding KFC at Tumut sold at Burgess Rawson’s recent Investment Portfolio Auction for $2.63 million on a yield of just 4.39% – the sharpest yield in history for a regional KFC sold on-market in Australia.

Occupying a small 756sqm block of land, leased as a KFC for the last 27 years and with a renewed 10-year lease in place to Australia’s number one KFC operator Collins Foods, the property was sold to a private investor amid a deluge of interest.

Burgess Rawson agent Beau Coulter, who marketed the asset with Raoul Holderhead and Kieran Bourke, said more than 250 enquiries were received throughout the campaign.

With 15 registered bidders emerging before auction, Mr Coulter said the result and level of interest highlighted the increasing demand for fast food properties on the commercial market throughout the COVID-19 pandemic, and their standing as an ‘essential service’.

“What we’ve seen is that properties that have continued to be able to pay their rent in full throughout the pandemic are incredibly attractive to investors,” he said.

“With drive-through facilities and delivery services, fast food has been able to continue to operate and trade as normal or better over the past 18 months, as evidenced by Collins Foods recording a sales growth of 12.4% to $1.07 billion.”

The Tumut property sold on a land rate of $3479/sqm – the fourth highest rate nationally for a fast-food outlet in the last two years.

Mr Coulter said while some asset classes had faced challenges through the pandemic, fast food had proven remarkably resilient and seen investors reap the rewards.

“Fast food assets not only recession-proof, but they’re also now COVID-proof and they’ve continued to thrive as essential services.”

“Anything where tenants have been able to continue to trade, perform and pay their rent, those asset classes have really come to the forefront.”

For further fast-food investment opportunities, join us at our next Investment Portfolio Auctions in September.