Never Underestimate …
“The Value of Your Firm”

On several occasions over the past fortnight … I have had to give this very same advice. And so, I thought it might be worthwhile exploring this in some detail with you.

What we’re actually referring to are the times when you need to relocate your Firm’s headquarters. And in the process, unwittingly forego considerable benefits that are rightly yours.
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Commercial Property Yields?

Exactly How Do They Work?

Recently, I was invited to conduct a Workshop at a 3-day Conference for some 1200 delegates.

My role was to provide some insight into the main Commercial property sectors. And explain just how the combined returns for each sector relate to one another.

So what I’ve done is to create a short Video for part of my address — and just thought you might find it helpful.
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Distortion Guaranteed?

While the Rudd government may have moved quickly to provide guarantees for the major Banks during a financial turmoil … the impact of doing so has been disastrous for borrowers.

Right now, these major Banks seem to account for virtually 80% of all owner-occupier loans for property.

As such, the margins they are charging have never been higher — despite the Banks’ protestations of being “squeezed”.

RBA's Dilemma

RBA's Dilemma


Therefore, overall borrowings borrowings have been slowly trending downward over the past six months — because the major Banks have effectively amplified the rate increases handed down by the RBA.
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Is Negative Gearing for You?

Buying and negatively gearing a Commercial investment property is not forever in one — particularly, with interest rates on the rise.

And if you already have high personal debt … adding to that wouldn’t be a smart move on your part.

Make Borrowing just one of your Tools

Negative Gearing

Negative Gearing

Any gearing you decide to take on, should be viewed as part of your overall strategy — and not there simply to minimise your tax bill.
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Interest Rate Rises …
Are they a Good Sign?

The RBA’s decision on interest rates yesterday came about because of what’s happening here in Australia, rather than in Europe.

It has been made against the backdrop of our exporters having recently extracted massive price hikes for iron or in coal, as a result of China’s strong growth.

Since the global turmoil started in 2008, the $A has climbed by nearly 55% against the $US — and just over 40% against our other key trading partners.

RBA Logic

RBA Logic

This has more or less offset the rise in Australia’s local retail prices, through a sharp decline in the cost of imported items — like electrical goods, clothing, footwear and furniture.

As a result, the NAB’s business confidence index stands firmly positive for the third consecutive quarter. And even more importantly, actually improved throughout the last quarter.

h2. How will this affect Commercial Property?
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“Things Can Change So Quickly”

Share of Trade

Share of Trade

Have you stopped to think just how things have changed over the past 25 years?

Just take a look at the global trade figures for the United States, Japan, Germany and Britain.

After the United States, China is now the world’s largest economy. However, it is currently the largest exporter; while being the second-largest importer.

Here’s a cunning question you might care to pose at your next dinner party.
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South Yarra … Amazing!

Location Plan

Location Plan

If you haven’t been there for a while, you’ll be simply astounded at the Commercial transformation going on — between Chapel Street and the South Yarra Station.

9 Yarra Street

9 Yarra Street

Anyway, I’ve just been given access to several newly-tenanted Office Suites at 9 Yarra Street — which I presented to a select group of Clients, only yesterday.

And they’ve started snapping them up.

Since putting the details up on a web page for easy access … two of the Suites have sold. And three more have been placed “Under Reserve”.

And so, if you’re looking to secure a great little investment in the $200,000 to $600,000 price range … there are now only a few left!

Retail Returns to Favour

Retail property has had some press coverage of late.

It has shown a surprising improvement, given global events and the hike in interest rates.

Westfield (a good retail barometer) reported a strong mid-year result from its Australian shopping centres.

RetailMar2010As you can see from the table, Vacancy rates have fallen significantly and Yields firmed — particularly within the strip shopping centres of Melbourne.

And furthermore, rentals have also started to climb … as the economic recovery has given shoppers confidence to start spending again.

Currently yields ranging between 4% and 6.5% across these various strip centres. And would indicate that investors are returning to retail property once more.

If you are planning to acquire some Retail property, you need …

    1. A strong tenant (well-established, or proven backing);
    2. A long lease (5 years+); and also
    3. Solid rental reviews (CPI or at least 3.75% pa).

With these in place, you should be able enjoy a good long-term investment.

From here on …
Back to a 2-Speed Economy?

The latest figures show unemployment crept up from 5.2% to 5.3% last month — probably due to school leavers. However, the total number of hours worked actually jumped by 2.4% during February.

2-Speed Economy

2-Speed Economy

With predictions of a 60% surge in commodity prices from next month’s contract re-negotiations, this will put further strain upon the labour and capital resources of both New South Wales and Victoria.
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CBD Offices on the Move

Westpac has just released an Australia-wide outlook for Commercial property. And it predicts you will start to see growth in rents and values during 2010-11.

Two Cities

Two Cities

As employment numbers grow with the improved economy, demand for Office space will also take off again.
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Election Year Blues?

It’s not just rising interest rates that the Rudd government will have to contend with, in the run-up to the next election.

The joy of the resources boom restarting brings with it certain unwanted side effects. What you will start to see is wage rate increases; plus the drawing away of materials and equipment, from other sectors within our economy.

Our Exporters

Our Exporters


Furthermore, the stronger Australian dollar will bring increased hardship to our tourism and manufacturing industries — who exported goods and services internationally.

Not to mention, our local businesses … who are finding it harder and harder to compete with cheaper imports.

China

China

Clearly, Australia doesn’t want to miss out on the extraordinary growth occurring in both China and India.

However, the real test of the government will be in how it oversees the insatiable demand for labour and capital by the mining sector — while not starving the rest of the economy of these same key business imports.

With the voice of trade unions becoming louder, the temptation for Rudd is to resort to government subsidies. But sadly, it is often the most vocal (rather than the most deserving) who seemed to benefit from these type of handouts.

Maybe the preferred option would be to allow the “fittest” to survive; and thereby cause of Australia’s overall productivity to rise in the process?

But then, it is an election year!

Nonetheless, the continued stronger demand bodes well for Commercial property during 2010 and beyond.