Small investors have continued their foray into the Melbourne industrial property market.
Small have acquired four modern warehouse properties, at an average price of nearly $1.3 million, sustains the downward pressure on yields which has seen at least two sub $6 million properties sell at less than 7% in the last two months.
According to Colliers International’s Lynton Williams says the firm yields are no surprise given the growth in smaller investor numbers as a result of low interest rates and oversupply in the residential markets in recent times.
“The ingress to the commercial market, and especially the industrial market, of new players, as both individuals and as part of syndicates, has increased competition to the point where we are now seeing yields to challenge those of the last decade.
“Why? Well why not. We’re talking about modern buildings with depreciation benefits in a lot of cases, and better yields and lease covenants than the small investor could expect in the residential market, and currently better yields than the share market,” Williams says.
He says the four industrial properties sold in the last two weeks to small investors sustained the solid recent evidence that a more mature investment market had emerged, following the recent uncertainty in the share and residential markets traditionally pursued by small investors, and one which could be expected to continue into 2004.
The four properties which sold in the last two weeks include:
• 14 Nyadale Drive Scoresby – modern office warehouse of 740sqm leased to Reelprint for 5 years with 5 year option from November 1, 2003 at $65,000pa net – sold for $855,000 at 7.6% yield;
• 5 Gilda Court Mulgrave (building 4) – 860sqm office/warehouse leased to Tyco Electronics on a five year lease with a 5 year option at $127,000pa net from October 1, 2003 – sold for $1.693 million at 7.5%;
• 6 Garden Road Clayton (building 6) – modern office warehouse of 700sqm leased to Mori Seiki Australia for 5 years with a 5 year option from October 1,2003 at $100,000pa net – sold before auction for $1.333 at 7.5%; and,
• 6 Garden Road Clayton (building 1) – modern office warehouse of 700 sqm leased to NEC for 3 years with a 3 year option at $97,950 from December 1, 2003 – sold for $1.306m at 7.5%.
The recent sub 7% yields included a distribution centre leased to Officeworks and an office/warehouse leased to Alcoa Wheel Products both of which sold at 6.87% and both to private investors.
Williams says a shortage of investment grade stock had also been a key contributor to lower yields.
