Surge in Medical Asset Sales Reshaping Investment Industry - Burgess Rawson

Surge in Medical Asset Sales Reshaping Investment Industry.

By Burgess Rawson National Partner, Yosh Mendis

Against the backdrop of the constantly changing commercial property sector, an interesting trend has emerged in healthcare investment sales. Notably, there has been a significant increase in medical asset transactions, particularly evident when comparing the March quarters of 2023 and 2024.

Burgess Rawson’s database shows private investors have been busy snapping up a wave of medical assets with more than $68 million transacted in the March quarter of this year - a substantial increase of 325 per cent when compared to the March 2023 quarter.

The surge underscores the transformation in market dynamics with this rise attributed to a myriad of factors. These include the increasing demand for healthcare services, technological advancements in medical facilities, substantial government backing and the resilience of the healthcare sector overall.

Some of our latest transactions have achieved record low yields as the demand intensifies. Recent sales include the $24 million sale of an asset in Bridge Road, Richmond. The asset is leased until 2035 plus with options to 2060 with the three-level 1,227 square metre medical facility benefitting from a major capital-intensive fit-out and a solid net annual income of $1,520,890. Another transaction in Heatherton Road, Dandenong sold for $11.68 million reflecting a firm yield of 3.55 per cent.

Overall, commercial property sales for the first quarter of 2024 stood at $170 million, a modest increase from $136 million in the corresponding period of 2023. While this growth may seem subdued compared to the meteoric rise in medical asset sales, it still reflects a positive trajectory, indicative of the underlying strength and stability of the commercial real estate market.

Convenience retail saw a marginal decline, with sales hovering just under $40 million in 2024, compared to the previous year.

On the other hand, sales of fast-food drive-thru assets remained relatively stable, with sales maintaining consistency at around $14.64 million in both 2023 and 2024. These assets, particularly those leased to fast food giant McDonald’s command the lowest yields on offer cementing their place as one of the absolute must-haves in every property portfolio.

This resilience of fast food underscores the enduring popularity of quick-service dining options and highlights the importance of location and accessibility in driving demand for such properties.

Yields have barely shifted for these assets however they compressed slightly from 4.2 per cent in the March quarter of 2023 to 4.16 per cent in 2024.

Looking ahead, the commercial property market is poised to navigate through a landscape shaped by evolving consumer behaviors, technological innovations, and macroeconomic trends.

As investors recalibrate their strategies and seek opportunities that offer stability and growth potential, the dynamics witnessed in the March quarters of 2023 and 2024 serve as a valuable barometer for understanding the shifting sands of the commercial real estate sector.

By Burgess Rawson National Partner, Yosh Mendis.

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