Appetite among yield-hungry private investors for commercial real estate has smashed auction reserves on everything from vacant reception centres to telecom towers, according to Melbourne’s Teska Carson.
The commercial agency said 400 people had attended five of its most recent auctions with an average of six bidders at each auction paying, on average, more than $450,000 over the reserve to secure properties under the hammer.
In two auctions the successful bidder paid more than double the reserve price: a vacant reception centre in Albion sold for $1.91 million – $1 million above its reserve, while a telecom tower in Footscray sold for $990,000 on a 7 per cent yield after the reserve was set at $490,000.
“A mix of surprisingly good economic news, the apparent containment of COVID-19, record low interest rates and better yields than are available almost anywhere else is behind what can only be described as a remarkable recovery,” said Teska Carson director George Takis.
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“This time last year we were at a very low ebb and it was difficult to see a way out. Now we are inundated with inquiry for pretty much every property we list, with strong crowds and multiple bidders. It’s just extraordinary,”
In the latest deal, five bidders from an 80-strong crowd pushed the price of a Balwyn retail strip property to $2.08 million – more than $400,000 above the reserve and at a land rate of $9412 per square metre.
It eventually sold on a yield of just 2.6 per cent through Mr Takis and colleague Travis Keenan.
Located within the Balwyn Shopping Village, the 306 Whitehorse Road property comprises a 139 square metre, two level building, including an 88 square metre shop on the ground floor, a large rear courtyard, and a one bedroom dwelling on the first floor.
It sold with a five-year lease to Paws Up Cafe from October 2020, returning $54,000 per annum net with 3 per cent annual increases.
Last week, a Sydney buyer flew to Melbourne to outbid six others to purchase the communications tower at Whitehall Street in Footscray, Mr Keenan said.
In another successful sale by the same agency, a 250 square metre shop at 481-483 Warrigal Rd in Ashwood, in Melbourne’s eastern suburbs, sold for $2.16 million on a yield of 2.56 per cent.
It sold $250,000 above the reserve.
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Originally Appeared On: https://www.commercialrealestate.com.au/news/extraordinary-appetite-for-commercial-real-estate-as-reserves-flayed-1053685/