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What is the average yield on commercial property in Australia?

By Greg Bell

Real estate investment returns in Australia can vary depending on when the asset was purchased, among a multitude of other factors. However, you should know what the average yield of commercial property in Australia is before taking the initial steps to begin the investment process. After many industries took a hit as the result of the pandemic and global economic factors, the future is bright when it comes to commercial real estate in Australia. Currently, the market is flourishing. Let's take a look at the increasing average commercial real estate yield.

Historic yields

According to the Australia Property Journal, "real estate transactions fell in the September quarter from the June quarter record of $8.3 billion, the $2.2 billion figure was still the fifth-highest on record as yields tightened further." They also report that yields were as high as 9.5% five years ago before the pandemic impacted commercial property prices. Many yields were lowered because businesses did not have the funds to pay their rent or because they were shut down due to the nature of their business.

Now, the average yield is increasing as the country is opening back up for offices and non-essential businesses. Let's take a look at the current rate of commercial property yields.

Queensland 

Buyer interest has been peaking in Queensland, especially by interstate investors. Four out of five investors were interstate investors who received excellent returns on the purchase of Gold Coast property at about 4.46%.

Again, the Brisbane commercial property yields were even tighter than the yields seen in other areas. The Trade Coast yields were the highest and were "tighter by 19 basis points for assets under 4,000 sqm and by 12 basis points for larger sites." This is one of the brightest spots in the nation when it comes to investment yields, with rent prices averaging $118 per square metre in the north.

Overall market yields

The market is looking up when it comes to the average yield on commercial properties. Even in Q1, the sub-regional retail property thrived in the first quarter of 2021 at around 6.85%. Additionally, the neighborhood retail property had a market yield of about 6.15%

If you are interested in calculating your own commercial property yields, the process is relatively simple. First, divide the annual rental income by the overall property value. Next, multiply the answer by 100. This can help you determine current or long-term projections of commercial property yield.

To learn more about the current market yield in a particular area you are looking to invest in or are already invested in, reach out to Ray White Surfer's Paradise today.

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