Cashed-up property investors taking a punt on climbing the risk curve as yields tighten

Increasing numbers of cashed-up property investors are taking on more risk in a bid to maximise their returns as yields continue to tighten.

David Brisk and Nick Evans from Colliers International at 63 Rai Drive, Crestmead. Picture: Attila Csaszar

TIGHTENING yields have led to a strategy shift among an increasing number of cashed-up investors who are taking on more risk in a bid to maximise their returns.

Industrial specialist Nick Evans of Colliers International said investors were taking on the risk of buying vacant spec-built facilities, refurbishing older ones or even developing buildings.

In a recently-settled $2.8 million deal, a Brisbane-based private investor has snapped up a newly-developed office/warehouse vacant possession at 63 Rai Drive, Crestmead.

The 1741sq m spec-built tilt panel facility sits on a 3067sq m site and features three roller doors, 9m internal clearance and corporate-style office space over two levels.

It is one of five buildings within an industrial subdivision developed by Carlow Properties.

David Brisk and Nick Evans from Colliers International outside the Crestmead spec-built facilty that was snapped up by an investor for $2.8 million.

“We seeing local and interstate investors climb the risk curve to secure prime grade assets,” said Mr Evans, who negotiated the transaction with colleague David Brisk.

“The tightening of yields is driving people to look for a better return.

“Yields are continuing to tighten from being in the 7 per cent range 12 to 18 months ago, down into the low to mid 6 per cent range.

“In order to get that return back up towards the 7 per cent range this investor has taken on the vacancy risk to secure a better return going forward.”

Mr Brisk said the buyer was capitalising on the low number of prime grade buildings for lease in the market.

“He can see the leasing market is strong, particularly with the new modern buildings,” he said.

“The lack of supply in this size range provided the investor confidence that he would secure a tenant in a suitable time frame.”

“Also, based off his portfolio, he understands tenants are more attracted to functional buildings with good internal heights and a corporate presence and this one ticked all those boxes.”

Mr Evans added: “There’s a huge weight of investors out there looking for somewhere safe to park their money and if they want a reasonable return they have to take on a bit more risk, whether it’s developing a building themselves, or buying a brand-new building that’s vacant or refurbing an older building.”