New Bunnings fetches $22m as investors snap up essential services
A Melbourne family has paid $22.2 million for a newly-opened Bunnings warehouse in Queensland, buying it sight unseen amid strong investor demand for ‘pandemic-proof’ commercial properties.
The Bunnings in Plainland was the most expensive property in Burgess Rawson’s largest portfolio auction, with $156 million worth of fast food, childcare and other essential services assets sold over two days.
Burgess Rawson director Billy Holderhead said the newly-constructed Bunnings at Plainland attracted a huge amount of interest from across Australia.
Mr Holderhead said there were more than 190 enquiries about the Bunnings, with 13 investors bidding on the property during Burgess Rawson’s Melbourne auction on Wednesday.
“All were first-time Bunnings investors, including eight from Melbourne who all bid sight unseen,” Mr Holderhead said.
“The Bunnings buyer and underbidder were both Melbourne-based private families who weren’t able to inspect the property before the auction because of the interstate COVID border closures.
“They spent $22 million based on the confidence they have in the Bunnings business and confidence in the steady income stream.”
Mr Holderhead said it was a rare opportunity to secure a Bunnings through a public sale and for less than $25 million. Before the Plainland sale, the 15 freestanding Bunnings investments sold since January last year had an average price of $51 million on an average yield of 4.73%.
It was only the second freestanding Bunnings to be publicly marketed in Australia this year and followed the $11 million sale of a Bunnings in the NSW town of Young in May.
“All these people were waiting and looking for a Bunnings,” Mr Holderhead said.
“Everyone’s been desperate for one through COVID.”
Bunnings Plainland, which opened earlier this month, was sold for $22.2 million, 11% above its reserve price, on a record yield of 4.21%.
Mr Holderhead said it was the strongest Bunnings yield for a traditional land and buildings investment.
Burgess Rawson sold Bunnings Plainland on behalf of Queensland company De Luca Corporation, which developed and constructed the 9421qm warehouse. It was the 27th Bunnings store constructed by De Luca and the third the company acquired for development.
Strong demand for fast food, childcare and entry-level assets
Burgess Rawson’s portfolio auction featured 50 properties worth a combined $192 million, with essential services assets across fast food, fuel, childcare, medical, government, banking, supermarkets and shopping centres.
COVID-19 has increased demand for essential services assets with long leases and big-name tenants or “pandemic-proof” properties.
Forty properties were sold for a combined $156.1 million, with a St George Bank building in NSW’s Bega snapped up for $700,000 before auction.
Burgess Rawson said it achieved an 82% success rate across the auctions in Sydney on Tuesday and in Melbourne and Brisbane on Wednesday.
There were more than 350 enquiries and 100 contract requests for an entry-level KFC investment in the NSW coastal town of Forster, with the recently-refurbished store offered below replacement value.
It was fiercely bid on during the Sydney auction with the buyer paying $2.83 million on an extremely low yield of 2.93%, Burgess Rawson said.
Burgess Rawson director Kieran Bourke said the interest in entry-level assets received showed many investors were turning to the commercial property market for solid investment opportunities.
“In the lead up to this auction, we have received record levels of enquiries for entry-level investment opportunities from investors eager to start their commercial property portfolio,” Mr Bourke said.
Mr Bourke said the Sydney team also received more than 150 enquiries for its other entry-level investments, which included a dental clinic in the Newcastle suburb of Cooks Hill that sold for $640,000, a Subway in the NSW town of Windsor ($1.04 million) and a medical centre in Gosford ($710,000).
“The full capacity auction hall and record levels of enquiries received highlights the sheer demand for commercial property as investors are realising the strength the market offers for ‘set and forget’ investment opportunities,” Mr Bourke said.
Demand for childcare centres has also increased during the pandemic. All six childcare centres in the Melbourne auction sold for well above reserve, fetching a combined $34 million.
An established facility in Melbourne’s Glen Huntly sold for $6.9 million, while an investor paid $7.6 million for a childcare centre in Geelong’s Belmont that had the added bonus of a drive-through coffee shop.
Burgess Rawson said the four Victorian childcare investments all sold for sub-5% yields. An Ocean Grove childcare centre achieved the sharpest yield for a regional Victorian property, selling for $3.3 million on a yield of 4.39%, the agency said.