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High-yield commercial property investments still in demand

Investment in high-yield commercial properties, especially those with long-term tenants, is flourishing despite the pandemic, according to RE/MAX U’s Deepen Khagram.

“Investors are very focused on yields and we are achieving very good outcomes with commercial property that we are taking to the market,” he said.

Mr Khagram recently re-sold a 7-Eleven Service Station in Burpengary East for $5.4m, representing a yield of 5.55 per cent.

“Commercial investors are seeing potential, especially in retail, fast food and childcare,” Mr Khagram said.

“My core database comprises investors with good exiting stocks of retail, fast food and childcare assets as well as developers seeking greenfield sites offering construction opportunities.

“In the current environment, term deposit rates offered by financial institutions are very low. At the same time, borrowing rates on commercial investment are low.

“With these factors in mind, investors are willing to pay tighter yields to obtain a high-quality asset with a national covenant that will provide positive annual cash flow and compounded increases each year in accordance with the review mechanisms (annual increases) in the lease.”

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