In the niche but lucrative segment of commercial property, fast food freeholds stand out for their resilience and appeal, particularly in the current economic climate. This sector, though small, includes high-profile investments in franchises like McDonald’s and Hungry Jack’s, known for their stability and consistent performance.
Economic Resilience:
Fast food properties have shown remarkable resilience in maintaining their value, unaffected significantly by interest rate fluctuations and broader economic changes. This stability is especially notable compared to other sectors like retail or office spaces.
Solid Yields and Steady Growth:
The market has observed that yields and turnovers for fast food outlets have only shifted marginally. According to industry sources, with average yields now sitting at 4.36%, these properties offer an appealing return on investment, especially when considering the annual rental increases linked to the CPI.
Ideal for Private Investors:
Fast food freeholds present an excellent opportunity for private investors. With investment opportunities often below $6 million, these properties offer long-term, stable income streams from some of Australia’s leading companies. The blend of regular rent increases and strategic site locations makes these investments particularly attractive.
Inflation and Taxation Benefits:
These properties serve as an effective hedge against inflation and taxation, a critical consideration in today’s economy. The annual increase in income, coupled with the long-term appreciation in land value, offers a solid safeguard against inflationary pressures.
Consumer Demand and Market Presence:
The ubiquity of fast food outlets, highlighted by the significant market share of brands like McDonald’s, reflects the sector’s resilience and ongoing consumer appeal. This demand underpins the investment’s stability and growth potential.
Investment Volume:
Private investors have injected over $7.5 billion into commercial properties valued between $1 million and $10 million, per MSCI Real Assets data.
Yield Comparisons:
Fast food outlets like McDonald’s and Hungry Jack’s typically command tighter yields, averaging around 3.55% in the last 18 months. Factors like brand strength and location influence these yields.
Transaction Insights:
The sale of two adjacent fast food sites in NSW illustrates market dynamics, with a McDonald’s fetching a 3.51% yield and a Guzman Y Gomez yielding 4.45% – a reflection of investor perceptions of corporate strength.
Lease Terms and Outgoings:
Investors must know lease terms, outgoings paid by operators, and when rents are up for review. For instance, a recent auction of a Hungry Jack’s outlet in Brisbane highlighted the lease terms extending until 2042, illustrating long-term investment stability.
In Perth’s commercial property market, fast food freeholds represent a strategic and resilient investment choice. At Norfolk Commercial, we’re dedicated to providing our clients with tailored advice, ensuring they can navigate this sector with confidence and insight. Join us in exploring these vibrant investment opportunities, and let us help you build a diverse, robust portfolio suited to your investment goals.
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