Investors hungry for fast food assets
Australia’s love affair with bricks and mortar has increased demand for fast food assets, according to Burgess Rawson’s Fast Food Property Investment Report.
The report highlights compressed yields – from a median 6.95 per cent in 2012 to 4.92 per cent in 2017/18 – across both metropolitan and regional locations.
These investments generally range e from under $1 million to $6 million in price.
These assets have a low risk profile, and continue to grow in popularity, particularly with investors who own self-managed super funds, says Burgess Rawson’s director Simon Staddon.
“Demand continues to increase for these tightly held ‘set and forget’ assets, with many landlords holding multiple properties.”
Burgess Rawson has sold more than 78 per cent of major drive through free standing fast food assets Australia-wide over the past five years. Sales of more than $310 million have been transacted for brands including Hungry Jacks, KFC, McDonalds and Red Rooster.
Investor interest in the fast food sector is driven by its ability to embrace digital technology, Australia’s appetite for fast food, relative affordability, identifiable global brands, and prominent locations with secure long-term tenants, the report finds.
Staddon says digital technology has accelerated the sector’s growth. “Early adopters who harnessed the potential of Uber Eats have witnessed a significant increase in sales and customer reach,” he says.
“As the commercial investment market continues to grow, investors are often placing more importance on the asset class as opposed to geographical location. The yield differential for fast food assets in metropolitan and regional areas has narrowed. There is now a minimal yield difference between the two,” he continued.
Growth in the fast food services industry in Australia has been strong over the past five years, with revenue rising by 3.7 per cent annually to $20 billion.
More than 24 million Australians eat out on average two to three times a week – which is more than million meals each week, or 2.5 billion in a year.
Burgess Rawson’s report finds that the large site areas and strategic locations of the drive thru sites will “increasingly provide new development opportunities”.
In March, Stockland and McDonald’s Australia announced plans for a new urban renewal project in the heart Parramatta, as the fast food giant moves into housing. Currently in planning, the project is expected to deliver 3-new apartments.
Josh Bannister, McDonald’s senior development director, has said the project is “one of the first mixed use developments where McDonald’s has been integral to the design from the outset”. McDonald’s has signalled this could be the start of further projects which maximise under-used sites in built up areas.
Ingrid Filmer, also a director with Burgess Rawson, says recent stock market volatility, changes to superannuation rules and instability within the political environment have driven investors to find low-risk property assets with a low risk profile.
“Australia’s love affair with bricks and mortar has also increased demand for the fast food assets,” Filmer concludes.
Download Burgess Rawson’s Fast Food Property Investment Report.