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Service stations are among the best assets for investors at the moment, offering pumping returns and a confident future, according to one industry expert.
Dean Venturato, principal of diversified property consultants Burgess Rawson, the largest privately-owned commercial agency in Australia, said the nature of these properties – in large, well sign-posted locations, and often with long-term tenants – made them investor favourites.
“The most important attributes for a good investment in commercial property are that it has good exposure, is close to infrastructure and amenity and can take advantage of population growth,” Mr Venturato told the inaugural Symposium17, put on by Commercial Real Estate, on Wednesday. Other popular properties included fast food operations and childcare centres.
“Our most popular asset now is service stations, which can have all the right ingredients for good investment property. They are generally on main roads in highly-visible locations and have long leases, with their yields to about 6 per cent capitalisation rate.”
A childcare centre in Punchbowl, in Sydney, sold earlier this year. Photo: Supplied
There were some buyers who overlooked them because of environmental factors, and their long-term future is not certain given the expected rise of electric cars. “But oil companies are continuing to buy new sites, and add more value to them with, for instance, BP’s new partnership with Woolworths,” Mr Venturato said.
Fast food operations have also proved extremely resilient to changing economic conditions, with returns of about 5.5 per cent, while childcare centres have bounced back from the collapse of ABC Learning – once the world’s largest provider of early childhood education services – in 2008.
“They now have a clearance rate of over 90 per cent,” Mr Venturato said of childcare centres. “Plus fees are subsidised by the Government, more mums are going into the workforce so demand for services is rising, and we haven’t seen disruptors in this market as we’ve seen in other industries.”
Demand for childcare centres as an asset was extremely strong, with more than $200 million changing hands in the past year.
Recent research by Ray White Commercial found that the benefits of owning a quality property with good health and safety standards leased by a good long-term tenant with stable earnings was finding favour with an increasing number of investors.
Yields are generally higher in regional areas, up to 7.25 per cent, with Sydney having the lowest yields at just under 5 per cent, and Melbourne and Queensland at about 5.4 per cent.
The next most popular assets tended to be Government-leased buildings.
Burgess Rawson has offices in Brisbane, Melbourne, Perth and Sydney, all independently owned by their directors, with Mr Venturato working in the industry for 35 years. He focuses on the sale of investment properties to both private and institutional investors, with highlights including the sales of office and retail investments between $10 million and $50 million.
“Private investors account for over 85 per cent of commercial transactions in Australia so we’re considered a barometer of consumer sentiment in commercial property,” Mr Venturato says.