Key drivers that contributed to the success of commercial investment in 2021 will continue into this year predicts commercial property agents Burgess Rawson. A combination of investors driven to tangible, ‘bricks and mortar’ assets and residential property investors looking for higher yields in the commercial property market will continue to drive high demand.
Burgess Rawson concluded a stellar 2021 across its consolidated eastern seaboard business, selling 364 properties for a combined value of $1.784 billion. In comparison to the previous year, they transacted 184 sales for a combined value of $574 million.
Several factors have contributed to the exponential growth in sales including:
- The consolidation of three successful businesses across Sydney, Melbourne, and Brisbane.
- Five asset types dominated – fast food, medical, childcare, large format retail and hotels/liquor.
- Record breaking transactions were achieved for vendors even with increased market supply.
- The maturation of the Queensland private investor market.
- Launch of Portfolio Auctions in Brisbane to cater for increased localised private investor demand.
- Increasing audiences with the use of digital innovation and technology to convert in-room auction events into an online experience.
- Strong cross-border and offshore sales transactions despite border lockdowns.
- Low cost of capital.
Burgess Rawson CEO Ingrid Filmer said the first half of 2021 was very strong with $680 million worth of sales across 168 properties. But it was the second half that saw numbers soar, climbing to 196 properties selling for a combined $1.156 billion.
“It was a huge shift in the market,” said Ms Filmer. “In 2020, many vendors were watching the market rather than divesting.
“Meanwhile, the demand for high-quality, defensive assets only grew. For instance, our 7-Eleven portfolios back in October 2019 and February 2020 resulted in many unsatisfied bidders who were highly motivated to invest.
“Fast forward 12 months and vendors took action, bringing investments to market,” she said.
Burgess Rawson achieved outstanding results despite a record increase in supply. Five asset types dominated, including fast food, medical, childcare, large format retail and hotel/liquor.
“The drive-thru fast-food sector is a clear example with sales volumes soaring 93% year on year,” Ms Filmer said. “Despite the large increase in supply, the average yield dropped from 4.69% to just over 4%.”
The Portfolio Auctions generated the most sales, seeing an outstanding spike in transactions increasing from 66 sales totaling $241 million in the second half of 2020 compared to 174 sales for a combined $806 million in the second half of 2021.
The growth and expansion of the Queensland property market has played a key role in investor demand for essential services. Over the past five years, this market has matured with an increased depth of local buyers.
Historically, most purchasers of Queensland freehold investment properties sold by Burgess Rawson were Melbourne or Sydney-based. Recently, local Queensland investors have fought off the southern buyers with 80% of drive-through fast-food sites being purchased by local private investors, compared to 50% in 2020. This dramatic increase in local demand led to the launch of the Burgess Rawson Portfolio Auction cycle in Brisbane.
While auction sales dominated, the agency achieved solid growth across its EOI, off market and private sales. The combined value increasing from $119 million to $443 million with large value transactions such as Allaf Childcare Portfolio, Fyshwick Markets in ACT, Varsity Lakes Tavern and Chadstone Ford.
“The average price on our non-auction sales jumped, five-fold from $3.22 million up to $15.93 million.”
Ms Filmer predicts the momentum will continue.
“Over the past two years, investors have embraced a new way of purchasing and l believe that is here for the long- term. Transactions in 2021 have demonstrated ongoing investor confidence in high-quality, essential service assets.
“Not only were investors comfortable bidding at auction via phone or online, but we also saw a high number of cross border transactions and deals made sight unseen. Community lockdowns and restrictions did not deter investors who could not physically inspect a property. Instead, reputable tenants, secure leases, and the ability to trade through was too compelling.
“The confidence in essential service assets will prevail.”
Burgess Rawson’s first Portfolio Auctions for 2022 will commence in February with events in Sydney on 22nd, Melbourne on 23rd and Brisbane on 24th.
