Over the last five years a new asset class has somewhat emerged across the commercial property market. Investors looking to secure long term “set and forget” investments has driven interest in a range assets which were not previously considered as prime. These assets take the shape of service stations, fast food outlets, stand-alone liquor or supermarkets, banks or any other property which provide an attractive long term tenant with fixed rental increases.
These investments are more income stream driven rather than location or type of assets which has had growing appeal for a variety of private investors. High net worth individuals, mum and dad investors banding together to form syndicates as well as private super funds are the key investors in these assets, who are seeking stable, long term returns with known tenants who maintain their property. This gives the investors the benefit of regular and steady income with none of the outgoings usually associated with this type of investment with the exception of Land Tax.
Demand is excelling supply for investment properties such as service station assets in the current economic climate. Buyers are keen to diversify their property portfolios, which is a further factor encouraging investment plus record low interest rates. A number of portfolios of service stations, fast food outlets and banks have been put to market since 2011 where there was a strong uptake of investment activity. During this time we have seen yield levels show some volatility, to compress greatly down to new lows. Interest in these investments is greater than ever into 2016 particularly given the high increases to the residential market, record low interest rates and with limited stock available to market, this year will be a telling time for this new asset class.