Is it just me or are these yields just very low?? https://www.smh.com.au/business/com...-for-commercial-property-20191125-p53dup.html
When commercial yields revert to the mean there will be alot of tears. I cannot justify buying at yeilds that low. That's just me and I am probably the idiot in the room missing the obvious.
That makes 2. I feel as if money has somewhat shifted from resi into commercial, especially amongst some Asian investors (individual and syndicate). Quite frankly I have not seen any acceptable returns for the past 2-3 yrs for commercial property returns.
Compressed yields are often seen in the retail premises - buyers pay way too much for these, often as there is no development upside. The Ringwood site was for development Epping sold to an O/O, well above replacement value IMHO Burwood, rent would appear to be on the low side - only $21.6k or $250/m2 (even lower when if the LL isn't able to pass on GST). Wantirna - higher yield possibly reflecting some obsolecence in the building (may not have been touched in 30+ years)
Of that bunch, I'd pick the Wantirna one. The building seems to be in pretty good nick based on the ad and also google maps. It's a concrete slab type construction likely built in the late 80s or early 90s? Fresh coat of paint and no asbestos as you'd expect from that age. To me, the area doesn't seem too bad - formerly light industrial converted to a now light industry - many kids entertainment places. I like the fact that it's next to the Westfield Knox S/C and a bit if resi as well. There is currently a pretty good mix of active businesses in around that area based on google maps. FWIW, in 2013 I saw a property nearby on a corner as well I think Sherwood Court...so about 100m from there. It was 1,040m2, 540 lettable area with 2 tenants (now seems like there is 1 more, so 3). Sold for $715K (though older, brick type building) ...pretty steep profit over the years. If I took a mid point on what the lettable/total land is per sqm on the Lewis Road sale, it would be worth around $1.1mil or so without considering the leases. I don't think there is much you can do with the Burwood one, at 85m2 for the building there isn't much more you can do to extract more dollars other than putting up a second storey and putting another entrance in. Granted the area is very vibrant, and the shop is probably doing alright serving the Deakin Students.
The yield is horrendous. But how big is the site and zoning laws and precedents? If I get a good permit I could flip it at double the price. Can’t do that on most resi. Also this yield is net.
Sadly I think this is where the market is heading. People seem to be too happy just to park money in commercial and not really do yield calcs or homework.
