Pub investors in Australia searching for yield and looking to increase their holdings are shifting focus to Queensland’s market, according to CBRE’s H2 2017 Australia Pub Trends report.
In response to the report, CBRE Hotels Director Paul Fraser said there had been a significant weight of capital moving north from New South Wales and Victoria as buyers search for quality pub assets at higher yields.
CBRE Hotels Research Manager Ben Martin-Henry added key industry operators that went on buying sprees in 2017 caused further tightening of yields and as a result encouraged investors to look at opportunities beyond metropolitan precincts.
“Investors are being priced out and facing a lack of supply particularly in metropolitan New South Wales, so buyer attention is being drawn to south-eastern Queensland opportunities. However, the pub sector is one of the most tightly held in the country and it’s hard to find owners willing to part with prized assets,” Mr Martin-Henry said.
“There’s a large pool of investors looking to take advantage of the sunshine state’s strong tourism fundamentals, and we can expect to see more transactions taking place along the Queensland coast in hubs such as Cairns and Airlie Beach this year.”
Similarly, in New South Wales relative scarcity and sharp yields is also driving demand for assets further afield and along the coast.
“Newcastle has seen strong buyer interest recently, as has the Central Coast and Wollongong. Sales activity has increased noticeably, and yields have sharpened to around 9.5-10.5% for quality assets.”
Meanwhile, in Victoria, buyers have been quick to snap up freehold and leasehold assets due to heated competition.
“Asset values have been relatively steady; however, larger operators keen on increasing market share are pushing values up by paying inflated prices to secure high-quality assets. Going-concern pubs have also grown in popularity, and as competition ramps up in 2018, this trend is likely to continue,” Mr Martin Henry said.
Freehold assets are currently achieving average yields circa 4.5-5.5%, while those in rural and regional areas achieve yields between 8-10%.
“Demand within the sector maintained its high levels during the second half of 2017 and is showing no signs of fading. 2018 is likely to see further tightening of yields along the eastern states, as the market reaches the peak of its current cycle,” Mr Martin-Henry concluded.
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