“Any investment property valued around the $3 million mark with a quality long-term lease, whether it’s an industrial, retail, and to a lesser extent, an office asset, is being snapped by the marketplace,” said Mr Grasso, Director of Raine & Horne Commercial Brisbane Southside.
As an example, Raine & Horne Commercial Brisbane Southside recently secured the sale of a tilt slope building at 32 Perrin Place, Salisbury for $3.61 million, which is currently tenanted by Actrol Parts. Actrol is Australia’s largest wholesaler of parts to the refrigeration, air conditioning and allied industries and was recently acquired by ASX listed Reece Australia Limited (ASX:REH).
“We sold it at a nett yield of 7.5% to a local private investor, whereas the same property would have sold for a nett yield of 8.25% a year ago. This is the impact of falling interest rates,” said Mr Grasso.
“The 1787 sqm building was constructed in 1999 on a flood free location, which comes with full security fencing, good truck access and fully partitioned air-conditioned offices and meeting rooms. There were two committed buyers and the property sold in 48 hours.”
According to Mr Grasso, investors are paying more for commercial assets in 2015 because low interest rates are helping to make them more viable.
“12 months ago around 70% of our transactions were leases, while now it’s more like half of all commercial transactions are sales,” said Mr Grasso, who confirmed that investors are proving the dominant buying group.
“The stock market has topped out, and with low interest rates meaning that you can only can get about 2.5% for a cash holding, investors are recognising that a 7.5% yield after all outgoings are paid is exceptional.
“If you’re paying 4.3% for your finance and getting 7.5% nett, you’re 3% in front even without the benefits of depreciation.”