Commercial property investors are looking beyond Sydney to regional centres including Albury, Newcastle and Wollongong at a greater rate.
The rise of the Sydney market is compressing yields in Australia’s biggest city and prompting investors to pursue higher yields in other parts of New South Wales.
With regional centres currently offering strong opportunities for investment and capital market growth, Xavier Rahme, CBRE’s Regional Investments Manager, has witnessed growing interest.
“Yields within the metropolitan Sydney markets are typically in the 3% to 5% range in this tight market,” Mr Rahme said.
“There are several regional areas offering investors yields in excess of 7% with secure leases to established national and international tenants.
“Over the past 24 months, we have seen investors take note of the opportunities, shifting their attention accordingly.”
CBRE recently sold the Centrelink Parkes building for $7.5 million on a yield of 7.3%, and an office building in Albury for $7.8 million on a yield of 7.9%, to separate investors from metropolitan markets.
The Capital Markets team is taking two new properties to market, one in Newcastle’s burgeoning cultural and education precinct and the other just north of Wollongong.
The assets are expected to reach a combined value of nearly $20 million with yields of approximately 7%.
“The Newcastle and Wollongong commercial markets have seen substantial growth over the past five years, offering attractive investment prospects and superior value to Sydney’s metropolitan market,” Nick Heaton, CBRE’s Head of Private Clients, said.
In Newcastle, 275 King Street is an iconic 1,838sqm freehold that is 100% leased to the Commonwealth Government.
Generating a net income of $780,000 +GST per annum, the Government has been in occupation since 1996 and recently renewed its lease to 2023.
It will be sold in an auction on March 18, having been owned by the same vendor for 23 years.
On a Princes Highway corner block north of Wollongong, 44-46 Hopetoun Street, Woonona, is a 3,361sqm landholding with a gross floor area of 1,511sqm and 60 parking spaces.
Woonona Medical Practice is a multi-tenanted investment anchored by global giant Sonic Healthcare, generating net rental income of $527,000 +GST per annum.
“The King Street property in Newcastle has been well maintained and has excellent pedestrian links to the Newcastle University’s inner-city campus, the Honeysuckle waterfront, Civic Theatre, City Hall and the new State Law courts,” Mr Rahme added.
“Woonona Medical Practice occupies a prime location entering Woonona from Bulli on the Princes Highway, near the local IGA and Woolworths, hospital, schools, trains and beaches.”
For Australian/international news or global stories, follow us on Twitter: @cbreaustralia
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.