Medical Investment | $2,450,000 | Net Yield: 6.12% | VIC

This off-market Victorian medical and wellness investment presents an opportunity to secure a modern commercial asset within one of Melbourne's expanding metropolitan growth corridors. Leased to an established national health and leisure operator, the property combines long-term lease security, structured annual rental growth and exposure to increasing demand for healthcare and wellness services within a rapidly developing residential catchment.

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At a Rethink negotiated purchase price of $2,450,000, the investment generates approximately $149,944 in net annual income, delivering a 6.12% net yield. The property is secured by a 10-year lease commencing in 2024 and extending to 2034, with two further five-year options providing potential tenure through to 2044.

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The lease incorporates fixed annual rental increases of 3%, supporting consistent contractual income growth, while the semi-gross lease structure provides for the recovery of most property outgoings from the tenant.

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The asset comprises approximately 462 square metres of modern commercial accommodation situated on the first floor of a purpose-built medical and wellness complex completed in 2024. Constructed to a high standard, the property offers contemporary facilities designed to accommodate health, fitness and wellness operations.

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The broader complex benefits from substantial shared onsite parking, including basement accommodation, and a complementary mix of healthcare and service-based occupiers. This concentration of related uses supports the property's role within an established community services precinct.

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As a recently completed asset, the property may offer depreciation benefits and reduced near-term capital expenditure requirements, subject to individual tax circumstances and ongoing maintenance obligations.

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A key feature of the investment is the established tenant covenant. The property is leased to a national health and leisure operator with more than three decades of industry experience and an extensive portfolio of fitness and wellness operations across Australia.

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The tenant has occupied the premises since the building's completion in 2024, with the long-term lease and specialised fitout demonstrating an established operational commitment to the location.

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The initial lease extends to 2034, with two further five-year renewal options offering potential occupancy through to 2044. A bank guarantee provides additional security in accordance with the lease terms.

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The lease incorporates fixed 3% annual rental increases, providing a defined mechanism for contractual income growth. Over five consecutive annual increases, this equates to approximately 15.9% cumulative rental growth, assuming the increases apply as scheduled.

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The investment is structured on a semi-gross lease basis, with the tenant responsible for recoverable property outgoings. Land tax and property management expenses remain non-recoverable under the supplied lease summary and have been accounted for in the stated net income.

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A further consideration is the property's rental positioning relative to comparable healthcare and wellness accommodation. With passing rent assessed at approximately $340 per square metre, the asset is positioned below certain comparable premises within the broader metropolitan market.

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While differences in building configuration, location and tenancy requirements influence achievable rents, this rental positioning may provide longer-term reversion potential at future lease negotiations or reletting, subject to prevailing market conditions.

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Positioned within a growing metropolitan residential corridor, the property benefits from substantial housing development, expanding community infrastructure and increasing demand for accessible healthcare and wellness services.

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The surrounding catchment continues to attract new residents through large-scale residential development, supported by investment in transport infrastructure, retail amenities, education facilities and community services.

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An additional feature of the investment is the limited availability of future competing commercial accommodation within the immediate precinct. Master-planned development controls and restricted commercial zoning may support demand for established healthcare and wellness facilities as the surrounding population expands.

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The broader Victorian healthcare and wellness sector continues to benefit from population growth, demand for accessible community-based services and increasing participation in health and fitness activities.

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At a Rethink negotiated purchase price of $2,450,000, the investment delivers a 6.12% net yield on approximately $149,944 in annual net income. Accounting for estimated purchasing costs, the net yield equates to approximately 5.66%.

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Based on an assumed 65% loan-to-value ratio and 6.5% annual interest rate, the property is projected to generate approximately $46,432 in annual cash flow after mortgage interest expenses, representing an estimated 4.40% cash-on-cash return on the total cash contribution of $1,056,050.

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These figures reflect acquisition modelling assumptions and are not guaranteed returns.

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The property's fixed annual rental increases, long-term lease structure and potential future rental reversion provide opportunities for income growth, while its modern construction and positioning within an expanding residential catchment support its longer-term investment appeal.

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With a nationally established health and leisure operator, 10-year lease, fixed 3% annual rental increases, modern 2024 construction and potential rental upside, this off-market investment reflects the calibre of commercial property opportunities Rethink Investing continues to identify for clients across Australia.

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