‘Western Sydney is hot’: 7-Eleven service station sells for $4.95 million

Published on: 20 November 2020

Commercial properties that are “COVID-19-proof”, and that are near the new second airport in western Sydney were in high demand from buyers at auction last month.

Seven out of 10 properties sold at the Burgess Rawson Sydney Portfolio Auction, a sign of continued demand for properties classified as “essential businesses”, according to the agents.

One of these, a 7-Eleven at 212-222 Andrews Road, Penrith, sold for $4.95 million on a yield of 3.67 per cent.

Bidding started at $3 million and about 12 parties fought it out for the property, before it sold to a Sydney-based investor.

“There’s a lot of confidence in western Sydney because of what’s happening out in Penrith – it’s a major commercial hub,” Sydney’s Simon Staddon said.

Billy Holderhead, a director at Burgess Rawson Melbourne, who had the listing with Mr Staddon, said the strong result was partly due to the large amount of infrastructure investment in the precinct.

“[That part of Penrith] is unrecognisable compared with what it was a few years ago,” Mr Holderhead said, citing the Western Sydney Airport and road upgrades as key among the changes.

The property was sold with a 12-year lease in place to 7-Eleven but there was future development upside on the 5784-square-metre site.

It had an identical lease structure to other 7-Eleven assets sold by Burgess Rawson in the past 12 months, says Mr Holderhead.

The tight 3.67 per cent yield was in line with a continuing trend in the region, with the averaged blended yield of the 10 western Sydney 7-Eleven properties Burgess Rawson had sold in the past 12 months sitting at 4.24 per cent, compared with 4.98 per cent nationally.

“It’s clear that western Sydney is hot right now,” Mr Holderhead said.

The service station sector had been given a boost by new entrants seeking a COVID-19-proof asset.

“With coronavirus and  the subsequent designation of businesses as ‘essential service’, there are now a lot of people looking at service stations today who weren’t looking in February. They’re looking for something where if this thing [COVID-19] happens again their tenant will still be able to operate,” Mr Holderhead said.

It was this sentiment that had seen strong results for other essential service businesses at the auction, including a United petrol station at 35 Glenlyon Street, Gladstone Central, in Queensland.

“There is a lack of quality stock on the market at the moment and I see it as a very strong market for the right investments – the right essential services assets,” Mr Staddon said.

But the desire for assets also extended beyond essential service businesses such as service stations and liquor stores to industrial assets with exposure to industries which hadn’t been affected by the lockdown.

“Industrial definitely fits into that [definition] –  I reckon it’s one of the hottest asset classes around at the moment because it’s COVID-sheltered,” Mr Staddon said.

A warehouse at 21 Kenny Street, Wollongong, leased to Reece Group was an example of that demand.

“It’s leased to the the airconditioning arm of the Reece Group, which supplies equipment to the construction industry. Building sites haven’t been shut down and they’ve been active during the pandemic,” Mr Staddon said.

There were seven bidders competing for the property, which eventually sold to a Sydney-based investor for $3.17 million, reflecting a yield of 4.37 per cent.

“Wollongong has really, really picked up in the last two to five years. Newcastle used to be ahead of Wollongong but I can predict that’s going to change,” Mr Staddon said.

 

Written by Jack Needham, Commercial Real Estate. 

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