2017 Delivering massive returns for Sydney investors

Sydney commercial property1

Research from one of Sydney's largest managers of SME industrial property has confirmed that the under supply of industrial properties below 1,000 sqm in Sydney is continuing to drive significant increases in sale prices and rental amounts.

Managing Director of Bawden's Industrial, the companany that conducted the research, Barry Cawthorn, said the unique nature of these events was that they were happening simultaneously today.

"Normally we anticipate rising prices for a period before rental increases," Mr Cawthorn explained.

"When prices reach a point that no longer makes it a sensible price for businesses to invest their money, they retain their capital and look to the more liquid and exible options of renting."

Bawden's Industrial however has observed that both rentals and commercial property prices are at the monent, increasing at the same time.

"Since 2015 we have observed prices rise from approximately $1600-$1800 psm to $2800-$3000 psm for strata industrial and freestanding buildings with an area of less than 1000m. An increase over the research period of 60%," Mr Cawthorn added.

He said the sector still had no supply of serviced industrial land suitable for developers and small to medium enterprises to build on.

"Investors can therefore expect continued above trend growth and very healthy returns as rising land values increase replacement costs and continue to drive up prices.

"In July 2015 we completed transactions that reveal average net rentals for modern functional space were between $105-$110psm per annum. In July 2017 that same space is being leased for $125- $135psm per annum. An increase over the research period of 22%," Mr Cawthorn continued.

"In conclusion total returns being those from rentals collected and capital gains over the research period are extraordinary but we note these follow many years of subdued growth since the GFC in 2008."

Character office spaces continue to tempt tenants

Character office spaces continue to attract large numbers of prospective tenants, with a whole floor in the historic Austral Building on Collins Street in the Melbourne CBD the latest to attract a premium rent.

A financial services group signed a five-year deal at $155,000 per annum plus GST for the 250sqm Level 2 space of 115 Collins Street, in a deal negotiated by Douglas Murray and Stephen Land of Fitzroys on behalf of an international private investor.

“The unique conditions of the premises, with a pronounced mix of modern and classic architecture, and the location at the renowned Paris End of Collins Street was highly desired amongst prospective tenants,” Murray said.

The space features high ceilings and is fitted with a large boardroom and separate workstation areas.

The English Queen Anne revival building was built in 1890, designed by Nahum Barnet and commissioned by magazine publishers Alexander McKinley & Co., and has a striking red brick frontage. It was home to a number of literary and artistic groups and figures for nearly a century.

The new occupant joins French luxury leather group Longchamp, Swiss watchmakers Franck Muller and French bistro and restaurant Philippe as tenants in the distinctive building.

Peace of mind for local investor

A local investor has acquired a float centre within the Elmington mixed-use development in Hawthorn East for $1.64 million.

Fitzroys Senior Manager Chris James sold the 320sqm space at 2/96 Camberwell Road on behalf of the developers, with a lease to Beyond Rest at a 6% yield, returning around $100,000 per annum.

The four-level boutique Elmington development is positioned on the corner of Camberwell Road and Roseberry Street.

The concept of “floating” is beginning to take off in Australia. Floatation tanks are a large, enclosed sensory deprivation pod with super-saturated salt solution that allows the person to float on the surface of the water. It is used by many as a form of meditation and means of mental and physical relaxation.

James said the growing popularity of experiential services such as this underpinned the ongoing value of the property.

Last year he sold the vacant 1/96 Camberwell Road space within the development to a local architectural firm at a rate of more than $6,000 per sqm.