The Brief

A specialist doctor already familiar with healthcare property as an occupier, looking to invest outside their home state. Medical, freehold, and a preference for assets where the income could grow rather than simply hold.

Why the Vacancy Was the Opportunity

Fully leased assets are priced for the comfort they provide. Every buyer wants clean income, no leasing work and no void period, and that universal preference is capitalised straight into the price. When you buy a fully let asset you are paying a premium for certainty that the vendor has already extracted.

A vacancy has the opposite effect. The bidder pool thins out, the price reflects the current income rather than the potential income, and the buyer captures the uplift instead of paying for it.

That logic only holds if the vacancy is solvable. This is where most vacancy plays go wrong — the discount is real, and so is the reason for it. The question we work through is never whether an asset has a vacancy. It is whether the space is genuinely lettable, at what rent, over what period, and whether the entry price pays you adequately for carrying the risk and the holding cost while you solve it.

How We Assessed It

We tested the vacancy the way a leasing agent would rather than the way a buyer would. Depth of tenant demand for that space in that location. Comparable rents actually being achieved, not asking rents. Fit-out condition and what incentive would realistically be required. Realistic time to lease, and the holding cost across that period, deducted from the case rather than assumed away.

We also tested the downside: what the return looks like if the space takes materially longer to lease than expected, or lets at below the assumed rent. The asset needed to work on that basis, not only on the optimistic one.

The Outcome

A multi-tenanted medical freehold in a prime location, acquired at circa $3m. Two long-term tenants underpin the income at a circa 5% initial yield, with a clear path above 6.5% net once the vacant tenancy is leased.

The uplift is not guaranteed. It is a leasing outcome, not a contractual one. But the client bought it at a price that reflected the vacancy rather than the solution.