Investor interest in fast food assets is heating up as demand outstrips supply.
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Burgess Rawson Wollongong is one agency that has firmly set its sights on investors interested in such property in the Illawarra.
It coincides with Burgess Rawson’s Fast Food Property Investment Report showing fast food sales yields have compressed from a median 6.95 per cent in 2012 to 4.92 per cent in 2017/18 in metro and regional areas.
The agency believes the recent sale of Domino’s Pizza Figtree for $1.2 million on a compressed yield of 5.32%, is a sign that investors are looking at regional areas such as Wollongong to invest.
Burgess Rawson Sydney director Simon Staddon said such assets were highly-sought after and have a low risk profile.
Mr Staddon expects them to continue to grow in popularity, particularly with investors who own self-managed super funds.
“Demand continues to increase for these tightly held ‘set and forget’ assets, with many landlords holding multiple properties. Investors are prepared to pay a premium to de-risk their property portfolios,” he said.
“They also offer long-term indexed income streams, underpinned by strong land values. While many think investors are only attracted to these assets in major cities, regional fast food outlets are some of the best performing in the country.”
Investor interest in the fast food sector is also driven by its ability to embrace digital technology. Australia’s appetite for fast food, relative affordability, identifiable global brands, and prominent locations with secure long-term tenants are also a factor.
“The fast food sector’s capacity to embrace digital technology has helped accelerate growth,” Mr Staddon said.
“Early adopters who harnessed the potential of Uber Eats have witnessed a significant increase in sales and customer reach”.
“As the commercial investment market continues to grow, investors are often placing more importance on the asset class as opposed to geographical location. The yield differential for fast food assets in metropolitan and regional areas has narrowed. There is now a minimal yield difference between the two,”
Mr Staddon said the recent sale of a Guzman Y Gomez in Coffs Harbour demonstrated that point well.
“It sold on a low 4.50 per cent yield in December 2017, which is considered more a metropolitan yield. While location was an important driver for the purchaser from Perth, the asset class and tenancy profile were the primary motivators,” he said.
Burgess Rawson has sold over 78 per cent of major drive thru free standing fast food assets Australia-wide over the past five years.
Sales total more than $310 million with an auction clearance rate averaging over 90 per cent, which is one of the highest across the country for commercial property assets.
Growth in the fast food services industry in Australia has been strong over the past five years with revenue rising by 3.7 per cent annually to $20 billion.
There are just over 24 million Australians who eat out on average two to three times a week, which is more than 50 million meals each week, or 2.5 billion in a year, accoring to Eat Out in Australia 2017.