Insider Tips to Help You Discover How to Succeed with Commercial Property
Last Friday, I attended the annual Commercial & Industrial Economic Forecast Luncheon.
And Dr Frank Gelber (director of BIS Shrapnel) kindly provided is perspective on the Australian economy and the Melbourne Commercial property market — looking forward for the next 5 to 6 years.
Probably the most pleasing aspect was … that his views will were pretty much in line with what I’ve been telling you here, for the past six months or so … [Read more…]
Over the past few weeks, you have been reading articles about the various Office markets around Australia.
As such, you would now be aware of how each capital City compares, in relation to its … Vacancy rates … Rental levels … and expected Capital growth.
However, most of that commentary has been focused upon CBD Offices. And as a result, people have been enquiring about just how the Suburban Office markets are also likely to perform, over the next few years.
Clearly, a rent differential exists between the City and Suburban Office markets. And obviously, that rental gap will also vary, as you move around Australia. [Read more…]
Wherever you live, you tend to believe (and will happily tell people) that it is undoubtedly the best place to live.
Really, it’s just human nature.
But when it comes to investing your hard-earned dollars into Commercial property … your decisions should be governed by something more than a warm and fuzzy feeling.
For the past four or five years, Victoria has led the nation in economic growth; and it is one of the few enjoying a net growth in migration from other states.
Furthermore, the latest ABS figures now confirm Victoria’s continued growth and job creation — leading all-comers over the past 12 months.
And you’ll also notice most of the various service sectors are currently outstripping the mining sector, as far as employment numbers are concerned. [Read more…]
Last weekend in the Financial Review, Andrew Clark began his article (on page 52) with the words:
“Australians don’t know if they’re in the middle of a pause that refreshes or the dullness before the deluge.”
That about sums up the general feedback I am receiving at the moment, from clients and colleagues alike.
Clark felt this probably stems from a combination of …
Presumably, this was behind the RBA’s decision to keep the cash rate on hold until next month — pending more economic data in the coming weeks.
According to the IMF … in spite of all the recent turmoil, the outlook for global economic growth appears quite rosy moving into the new financial year. [Read more…]
Today, we will be taking a brief look at the Industrial sector.
Investors have already been snaring some quality Industrial properties — as rentals have begun to climb, following a reasonably static period over the past five years.
As you can see from the table, this increase in activity has been reflected in the dominance of Developers bringing new stock onto the market.
Plus, you’ll notice that Private investors have emerged as the major category of buyers for Industrial property. [Read more…]
Australia-wide, Office vacancies are falling.
And Melbourne leads the way at 5.5%; with Perth close behind, at 6.6% — due to the rebound in mining activity.
According to the Property Council of Australia, these vacancy levels will reach 4.9% and 6.1% respectively, by January of next year.
With zero space coming onto the market in Melbourne, landlords will be well-placed to renegotiate far more attractive deals, as leases fall due for renewal.
Whereas, Brisbane’s current vacancy level of 9.2% is expected to blow out to 9.8% — making it very much a tenants’ market, as far as lease negotiations are concerned.
While rents are rising in most capital cities, selling yields are set to fall as well. This double benefit will be reflected in strong capital growth over the next four years.
Bottom Line: Shrewd investors are currently ranking their preferred Commercial sectors as follows …
Now is the time for you to start re-balancing your portfolio — and ride the growth wave through to 2018.
Yesterday, the Reserve Bank decided to hold the cash rate steady at 4.75%.
However, it also acknowledged that Australia’s underlying inflation rate will now be running at around 3% for the year — and that’s ignoring volatile items, like petrol and food price spikes.
Economists tend to agree that the high $A has effectively done much of the “heavy lifting” for the RBA.
But as these graphs show, the RBA will most likely be forced into a midyear rate rise. With at least one further rise likely, before the end of 2011.
Put simply: Increasing business confidence (confirmed by improved Business Credit figures) means more investment being undertaken by business … which will in turn will put pressure on wage rates.
So far, the RBA has displayed a bias towards pre-emptive action. And there is no reason to suggest it would suddenly change that approach. As such, many people have been left confused by yesterday’s decision.
However, astute Commercial property investors recognise the time to strike is when the “uninformed” are dithering … due to their lack of understanding.
Following the global financial crisis, the extent of trade imbalances has eased somewhat between Advanced Western economies and the Emerging Asian economies.
The gap between China’s huge current-account surpluses and America is out-of-control deficits may have temporarily narrowed. But the IMF believes the massive disparity will return, as world economic activity improves.
The ups and downs of exchange rates and capital movements are seen by the US and the Western economies as a method of ensuring a proper allocation of resources.
Whereas, it seems Asian countries view exchange rate movements as an annoying distraction from controlled expansion of their “home” economies. And amassing foreign currencies is seen as the best protection against a re-occurrence of the 1997 Asian financial crisis.
China’s stated goal of 7% growth over the next five years (plus its dependence upon coal, iron ore, LNG and nickel) will provide enormous economic upside for Australia.
On this basis, China’s contribution to global economic output will rival that of the European Union within five years; and even the US, within the next 10 years.
While Australia’s mining boom may help to create a “two-speed economy” … the flow-through benefits will be felt by everyone — to a greater or lesser extent.
Clearly, the growing mining (and mining-related) sector will need to be physically accommodated.
Similarly, the support services and businesses like … accountants, lawyers and the merchant bankers … will all need to engage more staff. And that means we’ll need to construct more office buildings to house them.
Bottom Line: Until we do that (which can take between 3 to 5 years), rentals for both CBD and suburban Office space will continue to escalate those capital cities where the vacancy rates currently sit at around 7%, or below.
Therefore, right now, that means you should be looking to snap up something in Melbourne, Sydney or Perth. And then, ride the current growth cycle through to 2018.
In several recent articles, we discussed the growing health of the CBD Office markets around Australia.
Melbourne still leads the other capital cities with a CBD vacancy rate of 6.2% at the end of March.
And according to Savills’ latest Office Spotlight, the number of whole floors within the city of Melbourne has fallen by some 35% — from 60 to 39 available floors, as at January 2011.
It seems that CBD tenants are scrambling to lock in larger areas, to allow for growth and avoid the expected huge rent increases over the next 5 to 7 years.
As a result, many mid-sized tenants are being pushed out into suburban locations. In turn, this is causing these vacancies to fall and rentals to rise.
As such, Melbourne’s suburban vacancy rate (at 5.8%) is now below that for the CBD.
And Colliers Research believes this could fall below 4% over the next 12 months — through a shortage of new space coming onto the market.
Likewise, Sydney and Brisbane have seen their suburban vacancy rates also decline. And net prime face rents in North Sydney are now up over $600 per sqm.
It would appear only Adelaide’s suburban Office leasing market has remained soft — despite several major sales putting some downward pressure on yields.
Bottom Line: Fundamentally, all the signs are there for continued growth in Commercial rentals and capital values over the next 5 to 7 years — despite the global backdrop creating hesitation for some investors, who are not part of the “Inner Circle”!
Yesterday, the Reserve Bank left the cash rate unchanged at 4.75%. And these graphs will help to explain their current dilemma.
For the time being, the RBA’s focus is upon “inflation excluding volatile items” — mainly because of the various natural disasters, both here and overseas. [Read more…]
Around Australia, Commercial clearance rates at auction are now about on par with Residential property — averaging at around 50%.
Victoria seems to be leading the way, with Commercial clearance rates for some types of property approaching 70%.
New South Wales is running about six months behind at? around 60%, with firming yields. And Queensland is probably a further 12 to 18 months away in its recovery. [Read more…]
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But first, just watch this short video to gain a quick understanding of these three essential elements that form the foundation of every negotiation.
If you’re new to investing, you might be wondering if it’s possible to manage your own commercial property. The short answer is “yes”, but only if you know what you’re doing.
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The current trends in the business have made it clear that office landlords have to cater to the needs and preferences of their tenants. Building owners and managers (who understand and meet these demands) will be able to command higher rents and reduce vacancy rates.
To expand on this, here are four key tips to help attract quality tenants.
