Why do commercial property seekers love Ballarat?

It consistently tops the list of Victoria’s most searched-for commercial property hotspots outside of the Melbourne CBD.

And key commercial agents say Ballarat is continually in demand for a few important reasons.

Colliers International Ballarat managing director David Wright says the regional hub, about 90 minutes west of Melbourne, has more attractive yields than properties in the city, but less volatility.

“Ballarat doesn’t have the big highs and the big lows like the Melbourne market does. Ballarat is more of a stable market, which in turn creates confidence,” Wright says.

“It’s a very stable market, with stable tenants and stable tenancies. You’re mitigating a lot of risk, because of the conservative nature.”

Best-kept secret

Realcommercial.com.au data puts Ballarat at the head of the class when it comes to non-CBD commercial property searches, though Wright says many city-based investors are still unaware of what the region has to offer.

“The investors that approach us saying, ‘what have you got’, they generally don’t know Ballarat. They’ve heard about Ballarat but they don’t know Ballarat,” he says.

An office leased to Bendigo Bank is among those currently for sale in Ballarat.

“You do get outside interest and enquiry, but the majority of properties that are sold in Ballarat are sold to local investors or owner-occupiers or developers.”

“We spend a lot of our time with Melbourne enquiries educating them on Ballarat and educating them on the location of the property or the tenant.”

Larger yields, strong tenants

Ballarat’s population is expected to swell by 40,000 people over the next 15 years, with the subsequent increase in workforce size to create more demand for services and commercial properties to house them.

Wright says Ballarat enjoys yields that are 1-2% higher than similar properties in Melbourne’s CBD, but with equally strong tenancy profiles.

“Generally retail and office are sitting at (yields of) 6-7%, and industrial sits at more like around 8%,” he says.

Historic properties like this old public school feature prominently among those for sale in Ballarat.

“I think a lot of the time the Melbourne investors are hanging out for those big ticket tenants, but I say they should be going back to real estate 101 – the nature of a property and the nature of its location.”

“They may not always find a national tenant, however it doesn’t mean that they’re weak. There are strong local tenants out there that perform well and are very stable.”

Worth banking on

Among the properties currently for sale in Ballarat is an office and retail building leased to Bendigo Bank on Sturt St, which will go under the hammer at the next round of Burgess Rawson investment auctions on December 7.

“That’s drawn a heap of enquiry from both local and metro investors,” Wright says.

The property features almost 400sqm of floorspace and is subject to a five-year lease to the bank, with options to 2025. It is currently leased for $106,855 per annum.

Wright says while the bank sits outside the $500,000 to $1 million sweet spot that many investors seek in Ballarat, a lack of local supply means it’s certain to be popular.

“It can be quite opportunistic. Be patient and the right property will come along,” he says.

“From a supply and demand point of view, there continues to be growing demand for investment in commercial real estate in Ballarat. Unfortunately the supply doesn’t always meet that demand.”