One of Australia’s largest fast food portfolios in years has hit the market in NSW’s Illawarra region, on the back of investors’ insatiable appetite for the buoyant asset class.
Developed by the Griffith Group, the newly completed Bayview Centre in Warrawong, south of Wollongong, features secure leases to ASX listed, national and global brands including McDonald’s, Hungry Jack’s, Starbucks, Oporto, Dominos and Liquorland.
Burgess Rawson National Partner Yosh Mendis said the portfolio was expected to generate incredible interest from investors across Australia.
“Fast food assets remain the crown jewels of the commercial property market, achieving record low yields as insatiable demand far outstrips supply,” he said.
“These properties are among the most tightly-held investments and are typically snapped up quickly when offered to the market.
“The inherent appeal of fast food properties lies in their long-term landlord friendly leases, guaranteed rental growth, low-risk income profiles, minimal management requirement while delivering consistent, reliable growing returns.”
Completed in December 2023, the expansive Bayview Centre spans 36,049sq m in the heart of Warrawong, and benefits from more than 77,000 cars passing the site daily as well as 100 per cent occupancy.
The centre is also home to national retailers such as Beacon Lighting, Super Cheap Auto, JB Hi-Fi, Trek, Autobarn, RTM, and Amart Furniture.
The fast food portfolio listing follows the recent $57 million sale of the large format retail component of the Bayview Centre which was acquired by MLC Asset Management (previously IOOF).
Mr Mendis said the assets would suit all price points, with annual returns ranging from $244,710 to $554,707 for the freestanding McDonald’s while lease terms range up to 20 years.
“The properties boast significant land sizes, each lot of up to 3304sq m and are strategically located in a fast-growing CBD precinct with solid economic activity.”
Burgess Rawson’s Fast Food Industry Insights report also revealed Australia’s fast food industry has shown robust sales performance of the past financial year, with more than $136 million in investment transactions.
Cap rates continue to firm, dropping from 4.46 per cent in the second half of last year, to 4.42 per cent in 2024.
“Cap rates for regional centres are at 3.62 per cent compared to 4.72 per cent for metro fast food outlets,” Mr Mendis said.
“Historically, metro cap rates have outperformed regional transactions.
“However, starting in 2021, this trend reversed primarily due to more top brands such as McDonald’s being sold in regional towns.
“Investors are holding on to their premium metropolitan assets creating a flurry of activity in the regional counterparts.”
According to the report, with a population of more than 26.6 million people, Australia has a ratio of one fast food outlet for every 880 people, making it a hotbed for culinary convenience.
McDonalds is on target to have more than 1000 stores across Australia by 2027 and currently has a 23.2 per cent share of fast food revenue in the country.
KFC has almost 800 stores in Australia, with 35 added last year alone, while Hungry Jack’s recorded $2 billion in sales for 2023, up 12.6 per cent on the previous year.
Red Rooster, which was established in 1972 in Kelmscott, WA, now has more than 360 stores nationwide, and has recorded 40 per cent revenue growth since 2029.
“Australia’s fast food industry has proven to be a most sought after asset class for investors, offering a blend of secure returns, robust growth, and a dash of innovation,” Mr Mendis said.
“The strength of a fast food brand plays a crucial role in determining the capitalisation rates of its sales.
“Global giants like McDonald’s and KFC with well-developed networks in Australia benefit from strong brand recognition with investors, leading to lower capitalisation rates.
“In contrast, niche brands might face higher rates due to perceived risks relating to their permanence and longevity.”
Mr Mendis said premium locations played a pivotal role in the success of fast food investments, with establishments strategically positioned in high-traffic areas near major highways, shopping centres, and tourist destinations.
“The future of the fast food industry in Australia is poised for transformative growth and continuous innovation, driven by evolving consumer preferences and rapid technological advancements,” he said.
“As the industry contributes significantly to the GDP and grows faster than the broader economy, it stands at the forefront of the commercial property investment landscape.”
The Bayview Centre fast food portfolio will be sold individually at Burgess Rawson’s Portfolio Auction Event 170, at the Sydney Opera House, on August 6.
