Editorials

"ABC SITE TO HOST HIGH-TECH PARK"
The Australian Financial Review - 9 October 2007
Robert Harley


Peter Campbell's Lindsay Bennelong Developments has bought the former ABC site at Gore Hill on Sydney's Lower North Shore for $70 million and plans a $320 million high-tech business park and motor showrooms.
Mr Campbell made his fortune in housing, transforming Clarendon Homes into a broad residential business and selling the operation to the Investa Property Group at the height of the NSW housing boom. He said the size and location of the Gore Hill site presented the opportunity to create a benchmark commercial and industrial development.
"Our vision is to create an engaging business environment that is aesthetically appealing and environmentally responsible," he said.
The 4.5 hectare site, which wraps around the well-known, Broadcast Australia-owned transmission tower, occupies a key position on Sydney's north shore, with an extensive frontage to the Pacific Highway and easy access to most parts of the metropolitan area through the Gore Hill Freeway.
In 2004, the ABC sold the site to Investec Bank and Developmentlink Corp for about $35 million, but after gaining development approval the joint venture has moved on.
Lindsay Bennelong extended the site, buying the 1200 sq m former service station on the Pacific Highway or $4.5 million, and will lodge a new development application.
"The service station held the key to the prime corner of the site," Mr Campbell said. "We could have developed successfully around it, but having the service station makes it an iconic site."
The development would feature as much as 71,000 sq m in a combination of offices, premium showrooms, retail precinct and high-tech industrial space.
"Buildings will showcase exemplary contemporary architecture and sit within extensively landscaped open spaces," Mr Campbell said.
"Environmental initiatives such as reducing carbon output, maximising energy efficiency and conserving water will only become more important in the future.
"We are committed to incorporating contemporary design principles and advanced technology, to create the highest possible level of environmental sustainability."
Lindsay Bennelong development manager David Flanagan said the new plan, which is being designed by Cameron Chisholm & Nicol, was largely a shift of emphasis without any change to height or floor space ratio.
More motor showroom space - about 5000 sq m - will be developed along the Pacific Highway frontage, and more office space along the spine of the site to take advantage of views, particularly to the west.
"There seems to be significant demand and limited opportunity along the Pacific Highway - we have been contacted by a number of major motor users," Mr Flanagan said.
Leasing for the project is being handled by Mike Stokes of Chesterton International and Brad Sutton of Taylor Nicholas.
"The timing of the acquisition is impeccable," Mr Stokes said. "The demand for A-grade office accommodation in Sydney is increasing strongly."
The new development application is expected to be lodged before the end of the year and, if approval can be gained, the first stage could start appearing by the middle of 2009.
Mr Campbell said he was determined to create "innovative developments that combine cutting-edge design, state of the art construction techniques and a commitment to being at the forefront of environmentally sustainable development."
The first Lindsay Bennelong project is an apartment development in Rushcutters Bay in Sydney's eastern suburbs - a site Mr Campbell sold to Investa with Clarendon and bought back late last year.
As completion is due in 2009, Lindsay Bennelong should start selling off the plan in November through Ray White Double Bay.

"ARISTOCRAT'S SALE OF THE CENTURY"
The Australian Financial Review - 18 September 2007
Robert Harley

Aristocrat Leisure has put its surplus industrial and commercial holdings in south Sydney up for sale as it prepares to move to new headquarters at Macquarie Park.
One property sold for about $10 million earlier this year and another three that might bring nearly $50 million go up for sale this week.
The agent handling the latest sales, managing direct of Taylor Nicholas, Peter Taylor, said Aristocrat's holdings, which spread across three hectares in Rosebery, were a rare event in the best industrial suburb in south Sydney.
Expressions of interest, either in one line or separately, close on October 11.
The properties are:
*A four-storey office building of about 5500 square metres at 55 Mentmore Avenue that Aristocrat will sell on a short-term leaseback that Mr Taylor said would ideally suit another owner-occupier.
*An older-style industrial building at 115-133 Dunning Avenue, on the corner of Morley and Hayes streets, which, on 7500 sq m, would suit refurbishment or redevelopment.
*A two hectare island block bounded by Dunning Avenue, Mentmore Avenue, Hayes Street and Harcourt Parade that would suit refurbishment or redevelopment.
Late last year Aristocrat, advised by Grant Samuel, pre-leased a new 15,400 sq m facility in the Goodman Group's Pinnacle Office Park at Macquarie Park.
At the time, Aristocrat said the research and development group would move in late 2008 and the head office "shortly thereafter".

SOAPBOX - THE SYDNEY MORNING HERALD

Unfortunately this column is no longer published by the Herald

By Rodney Lay

" Techs latest discovery is out Silverwater Way"

It wasn't that long ago that Hi-tech users and IT companies considered the North Shore and North Ryde as the place to be. We, at Taylor Nicholas have noticed however that these same companies are in fact moving to the Silverwater area and surrounding industrial suburbs from such traditional Hi-tech areas and the developers out here are starting to provide this pioneering style of accommodation.

The Silverwater area and its surrounding industrial suburbs are undergoing a significant change in relation to the types of industries looking to move to the area. As the road networks improve, traditional industrial users in transport and distribution industries are moving to larger and cheaper premises further west, creating a vacuum for other industries to fill.

Just as the large transport companies were attracted to the Silverwater area in the past as the then geographic centre of Sydney, the move is now on from cleaner industries relocating from the more expensive industrial areas of the North Shore and South Sydney. These companies, generally related to the computer/IT industry, have now identified Silverwater as the place to be. This is no doubt due to the cost savings and easier access to the area as previously identified.

The change of industrial users has resulted in a different style of industrial space requiring greater office component, research and development areas and reduced high clearance warehouse space.

Recently completed projects to service this requirement include 7 Millennium Court Silverwater developed by Arunta Investments and 11 Underwood Road Homebush developed by Homebush Business Village.

These projects cater for the IT and computer industries with above average presentation, greater office components and areas suitable for tech space or research and development, at prices for sale or lease at substantial discounts to equivalent space in traditional IT areas.

Rodeny Lay is a Senior Sales & Leasing Executive at Taylor Nicholas' Western Sydney Office.

 

By Peter Taylor

It was only a few months ago that I wrote in this column that taxes on property continued to be in the sights of the government. Well that was an understatement! Last time stamp duty impost was extended under the guise of anti-avoidance, now it's increased because the state has run out of money; but its someone else's fault. Strange this, but Mr Carr has been telling us that he's been running a surplus for 8 years. Well where's the money gone? I notice also that it wasn't someone else's fault when they were in surplus.
Now we're told its fair to extend stamp duty to vendors. "What are they worried about?" Mr Carr asked, "its tax deductable." Well why not make it 10% so they get more of a tax deduction? Then their spin is that it's only 2.25% on investment property when sold. Well no it's not. Firstly its not 'just investment property' it's all property other than the primary residence and farms. That affects a lot of businesses as well as the mum and dad investors. Also the rate is actually 2.475% because Mr Carr you charge a tax on a tax. That's real fair. Mr Egan then acknowledges that along with changes to Land Tax this will make property 'marginally less attractive.' The new system, we're told "would provide business with a significant reduction in land tax bills." OK maybe in year 1, but it's not indexed so guess what, look out in years 2 and above. We have for years been listening to Mr Egan saying that the former system of Land Tax was fair. Now he's acknowledged it wasn't and he's extended it to all property other than the family home.
Whether you want to hear it Mr Carr and Mr Egan, you've provided a major disincentive to invest in property in NSW on an industry that has kept you looking good for many years. Yes, first home buyers will be happy at least whilst there's something to buy under $500,000, (don't forget that's not indexed either!) but you've hit everyone else simply trying to build up for the future. I note that Mr Carr however sees his future in New Zealand.

Peter Taylor is Managing Director at Taylor Nicholas' South Sydney Office.

 

By Hugh Anderson
"Industrial sector continues north"

As 2003 draws to a close there seems to be no signs that the buoyancy evident over the past few years within the Chatswood and Artarmon industrial market will abate. One of the most notable characteristics of the past few years has been the shortage of sales listings relative to buyer demand and with interest rates not likely to increase substantially, this scenario is set to continue. This is no more evident than the fact that this year only a fraction of the number of auction listings were offered compared to last year. It is also interesting to note that despite the high level of sales demand, the leasing market has been steadily improving. One reason for this is possibly the fact that because there is so little available for sale, companies are forced back into considering leasing rather than sales.

One complex however that will assist in satisfying some of this sales demand is 2a Herbert Street St Leonards to be developed by JGRT Holdings. The development, when completed will consist of up to 76 industrial business units. It adjoins the Royal North Shore Hospital which has recently received approval from the State Government for a $452 million redevelopment and upgrading. The estate, to be known as St Leonards Techno Park will comprise a mix of traditional industrial units and 'High Tech' business units that will cater to a wide range of industry types large or small, and will have the flexibility to adapt to most size requirements. Already a major international company has committed to a lease for around 7000 m2. All areas within the Park will have a quality, air-conditioned office fit-out and high clearance warehouse with basement security parking.

As the leasing market improves there may also be some investment property available for sale to satisfy a plethora of investors wishing to invest in commercial/industrial real estate.

Hugh Anderson is a Senior Sales & Leasing Executive at Taylor Nicholas' North Shore Office.

 

By George Constantine

"Short term leases long term problems"

The Leasing market has copped a battering recently mainly as a result of the low interest rate environment currently evident. This situation has encouraged purchase rather than leasing of work premises and given present forecasts is likely to be the norm at least for the next year or two. But of recent the Leasing Market has made a come-back of sorts. Firstly with there being so little property reaching the market for sale to satisfy buyer demand, many 'would be' buyers are returning to the leasing market after unsuccessfully looking to purchase a factory. Others are simply making the call that the sale market has peaked and are therefore happy to stay in the leasing market and wait at least until the heat comes out of the market before they buy.

What is making it worse for would be tenants in South Sydney is that many of the properties available for lease, are only available short term as owners await zoning changes or development approvals for residential redevelopment. Rather than tie their property up with long term leases and potentially miss the market they are happy to either keep the property vacant or lease only for 12 months or so and then capitalise on the increase in value the rezoning affords.

Other owners of potential development sites are also not prepared to offer long term leases to tenants unless a demolition clause is included so that if the time is right, notice can be given to the tenant to vacate and a redevelopment can occur. The problem is that few tenants are prepared to sign for a short term given costs of fitting out a warehouse or relocating. Put simply, the good tenants won't spend the money to move to a premises if they do not have a long term commitment from the owner. Adding all this up means there is not as much property available for lease as what there was 12 months ago and this is not likely to improve over the next 12 months given how much land is still to be lost to residential zonings.

George Constantine is a Senior Sales & Leasing Executive at Taylor Nicholas' South Sydney Office.

 

By Peter Taylor
"Its a familiar picture for those set to buy"

Much has been said about how buoyant the general property market is at the moment and certainly the industrial market is no different. Investment properties are almost non-existent and those leased properties reaching the market are selling for yields in some cases as low as 4%, unheard of even a few months back. Whilst the property I refer to does have future redevelopment potential, it is leased for at least the next three years but in all likely hood this will be for a longer period if the tenants exercise their options. With the demand for property by trusts and institutions showing no signs of letting up, private investors and consortiums are also finding it difficult for 'a place to park their money.' With interest rates forecasted to remain close to their present levels in the near future, this scenario is likely to continue for some considerable time yet.

Similarly for the owner-occupier, freestanding industrial buildings are rarer than hen's teeth and again prices well beyond what were record prices only last year. Even property for sale in the strata market are few and far between. This is characteristic of most of Sydney's industrial areas. The South Sydney industrial market which has benefited from zoning changes continues to set sales records even for property outside of the Green Square precinct. On the North Shore buildings of all type and size are readily snapped up. In one recent sale Taylor Nicholas conducted, a 3500 m2 building achieved a price of $7.25 million within days of becoming available for sale.

The same can be said of the inner west and western Sydney areas, what is listed is sold and sells well.
The leasing market on the other hand continues to suffer. Whilst certain segments, mainly the larger sized property, remain strong the general leasing market can only be described at best as 'improving.' But many of the owners looking for tenants for their buildings can at least be comforted in the knowledge that should they fail to find a tenant within a reasonable period there will in all probability be a buyer if things get tough.

 

By John Hemphill
"Child care sidesteps high costs for space"

The Child Care Sector has been one of the most exciting growth industries in Australia in recent times. According to government statistics there are approximately 700,000 children in child-care in Australia in approximately 4,500 centres Australia wide. This stems from the situation where 49% of women with children up to the age of 4 are participating in the workforce.

However one of the main problems encounted by the industry is the difficulty in finding properties in which to locate a centre. Traditionally, child care centres have located themselves within residential suburbs near to where the population reside. But with either a lack of suitable property available or existing property prices being cost prohibitive, operators are looking for alternatives.

One of these alternatives is to locate within industrial areas where rents can be a fraction of those especially in commercial or retail areas. Last year for example a new child care centre was established in a traditional warehouse unit in Chatswood then owned by AMP. Such is the demand for sites that Taylor Nicholas is currently finalising two leases to child care centres in the Northern Beaches industrial areas of Brookvale and Frenchs Forest.

But even in an area such as South Sydney where thousands of new residents are expected over the next few years child care operators are having their problems in locating suitable sites. Not only has the recent property boom made it very expensive to secure appropriate property or parcels of land but competition for the very property the operator requires by developers is making the property increasingly scarce.

It is ironic that the residential conversion of old industrial areas such as South Sydney is making the area more densely populated which is thereby increasing demand for child care, is itself making it increasingly prohibitive for the operators to be located in the areas of greatest need.

 

By Peter Taylor
"Industrial operators feel the squeeze"

The old industrial area of South Sydney has been undergoing a transformation for some years now ever since the Green Square re-zoning encouraged residential re-development. Residential developers have arrived in the area in droves converting many of the old and outdated industrial buildings to new apartment complexes and estates. Victoria Park and the old ACI site are prime examples of the large-scale redevelopment from industrial use to residential. As values have increased along with general acceptance of the area by new residents, the residential conversion has accelerated and spread to the surrounding suburbs of Alexandria, Waterloo and Rosebery. Where industrial land was once worth around $500 to $600 per square metre, this same land with residential zoning has more than doubled in value. In fact Taylor Nicholas recently sold one block of land for in excess of $2,200 per square metre.

Added to this is the pending re-zoning of the area set aside for the 'Green Square Town Centre' that will see a further 11 hectares of Alexandria transformed, in time, to commercial use. The South Sydney Development Corporation has announced the winning design for the Town Centre and should soon be in a position to exhibit its Draft Masterplan and Draft LEP.

Whilst most would be happy for this transformation, many of the traditional industrial users still consider that South Sydney is an ideal location for their business and the constant contraction of the industrial region is making it very difficult for these businesses to locate new or alternative premises.

In the last 6 months our company has seen around half of the traditional industrial stock offered for sale, being sold to developers for residential re-development. Unfortunately for many of the industrial owner-occupiers the residential values place prices far in excess of what these owner-occupiers can either afford or justify to their businesses.

With the scarcity of listings being characteristic of the general market, this is in turn having a dramatic effect on the prices being received by those vendors that are selling. And with interest rates, in all probability likely to remain at their comparatively low levels, the market conditions that we are currently experiencing are unlikely to change dramatically in the foreseeable future.

 

By Graham May
"What goes up mostly comes down"

There is little doubt that the (Commercial/Industrial) sales market is buoyant at the moment. Whilst prices have not increased to the same extent as many of the reported residential properties, prices have been steadily improving since their low in the early 90's. Talk to any Real Estate Agent at present and they will probably tell you they can't get enough property to sell. In other words there are more buyers than there are sellers. This is particularly the case with investment property whereby good stock is very hard to find. The main reason for this is simply low interest rates. Those owners with investment property have been reluctant to sell when they are receiving at least 8-9% on their purchase price having borrowed money at substantially less. Work out their return on equity and no bank Term Deposit can come close.

However if you believe the economic commentators, interest rates will only go in one direction over the next 12 months and that is upwards. Whilst most of us expect some increase in rates, many commentators are predicting cash rates will increase by as much as 1% by the end of the year. So how drastic will this anticipated rate rise be on the commercial/industrial market?

In theory as interest rates rise industrial property becomes less attractive in terms of return and therefore fewer buyers enter the market. Prices also stabilise as it is likely buyers perceive the market has 'peaked.' More stock is then likely to be available as existing owners try to 'cash in' on their profits.

On the other hand the increase may be good news for the leasing market. The leasing market has suffered considerably in recent years as low rates encouraged purchase rather than lease. In theory however, as interest rates increase, companies will be more likely to lease rather than tying up substantial amounts of capital in purchasing a property especially when the difference between the cost of borrowing money is closer to the cost of lease payments. This will be of at least be good news to those owners with potential vacancies due later in the year.

All of this however is in theory and at the end of the day predicating the market is no easy feat.

 

By David Taylor
"Manage your way to a capital gain"

There is no doubt that the popularity of industrial and commercial strata units have become more popular investments over the past few years. As economics dictate more subdivision of larger land parcels to strata units. However in most cases these investments provide a higher rate of return on their money than their residential counterparts and are leased for terms of between 3 and 5 years rather than 6 months common in residential investment.

In addition industrial/commercial units are not subjected to the severe limitations imposed on Landlords by the Residential Tenancies Act. An investor's return is further enhanced by the ability of Landlords to recover in most cases all his costs. Tenants under most industrial leases are required to reimburse the owner's outgoings including council rates, water rates, land tax and insurances and even 'make-good' any changes they have made to the premises during their occupancy.

As with any investment there is however cautions to be noted. A common misconception for example is that internal contents within strata units such as carpets, light fittings, blinds and even the interior paintwork of a strata unit are covered by the Body Corporate Insurance. This is incorrect. Each owner of a strata unit is responsible for the insurance of all contents in the event of damage caused by fire, theft, water damage etc.

Equally important is that landlords will require their own public liability policy as the Body Corporate Insurance will only cover the common areas of a building. The solution, employ a diligent managing agent. Not only will the agent collect the rents and outgoings due but should the be up to date with the latest trends, systems and tenant requirements that in the long run will minimise vacancy periods and thereby maximise the investment potential and return. This in turn will maximise capital gain over the investment period.

 

By Peter Taylor

"Housing projects crank up South Sydney industrial prices"

Recently the South Sydney region has been referred to as the jewel of Sydney's industrial region.  Zoning changes and major infrastructure improvements to road and rail have seen South Sydney's land values reportedly increase at a greater rate than any other industrial area in Sydney.

Well, it seems that it is still happening in the region, but not for the same reasons.  Probably the biggest recent surprise was Meriton's purchase of the former Mascot Central Business Park for $27 million.  The surprise wasn't so much the price paid but the fact that what was essentially a new, 17,000 square metre office/warehouse building was bought not for commercial use but for residential conversion/redevelopment.  Unfortunately for the traditionalists the price just didn't stack up industrially and the local institutions cum property players came a distant second.  The other big recent sale was Deutsche's purchase of the former IBM premises in Rothschild Avenue for $27 million. 

In these two deals alone, one can see how much impact the new zoning is having on the traditional industrial market.  If one in every two buildings, especially major ones, are being sold for residential redevelopment there is no doubt that more pressure will be put on prices for the remaining industrial areas. This is obviously subject to market conditions and we are already seeing signs that the residential unit market especially may well have peaked. Having said that, industrially speaking at the moment, if you can list it, you can sell it.  Unfortunately though, there remains very little for sale of non-residential property in all size ranges within the area.  With low interest rates encouraging owner occupation rather than tenancy, the leasing market is certainly suffering, but then again there are some extremely good leasing deals on offer as landlords respond to these market conditions.

 

By Hugh Anderson
"Businesses sour as meters spread reach"

It seemed not that long ago that parking meters were the exclusive domain of retail and CBD areas of the city.  The unthinkable, however, appears to be close to reality as several councils consider installing parking meters in their industrial areas.  Willoughby Council has been advertising its intention to install parking meters in the Artarmon industrial area for months.

  Artarmon, with its predominantly older-style industrial buildings with limited off-street parking, was targeted because street parking was at such a premium.  Artarmon also has possibly one of the highest concentrations of panel beaters in the city that, with their high need for parking, test the area's parking availability.  With no public car parks in the area and industry highly reliant on private transport, the council is reating a stir with its proposal.  Local businesses are not impressed, claiming the council is simply attempting revenue-raising.  Businesses claim that the meters are not wanted by them and question whether the council has undertaken a survey of local business owners to determine if they are wanted by the people the council claims its trying to help.  they believe that he council should adopt timed parking, not meters, if it is genuinely trying to assist local industry. Businesses also doubt the council's ability to service the meters and therefore make money from their installation.  Unlike the commercial and retail areas, the industrial area is basically deserted at nights and weekends and vandalism and theft is inevitable.  The cost of this is likely to be borne by the ratepayers and property owners.

 

By Rod Lay
"Orbital plan may be the road to riches"

The Federal Government announced some months ago that it was proceeding with the Environmental Impact Statement (EIS) for the proposed Western Sydney Orbital Motorway.  The proposal is to link the M2 motorway to Baulkham Hills with the Hume Highway at Prestons, providing four lanes of roadway nearly 40 kilometres long.  Although the proposal would not see the project before 2007, the expectation from landholders near to the scheme is that it will increase land values and rentals.

So how have recent infrastructure improvements throughout Sydney affected industrial areas adjacent to recent road/motorway improvements?  The most recent infrastructure improvement, the Eastern Distributor, has undoubtedly improved south Sydney's access to both the city and western suburbs.  Many are attributing the dramatic increase in land values in the area, of 25 to 30 per cent over the last 12 to 18 months, solely to the completion of the Eastern Distributor last year.

However it must also be acknowledged that about 280 hectares was rezoned or set aside for rezoning to residential.  A reduction in the amount of industrial land can only increase the value of that remaining, especially when south Sydney is such an important industrial area, with Port Botany and the airport requiring such associated industry.

Is western Sydney with its vast tracks of industrial areas likely to see such a dramatic increase in values or rents?  According to Macquarie Bank's Property Market Outlook, "industrial property adjacent to recent or emerging infrastructure should outperform other industrial areas throughout Sydney".

 

By Hugh Anderson
"Lane Cove benefits from tunnel vision"

Lane Cove is undergoing a transformation.  With the recent subdivision and redevelopment of the Chaplin Oval sports field into a new high-tech industrial precinct, the area has been transformed from what many considered the poorer cousin of North Ryde into a vibrant new industrial precinct.

Work has also recently started on the environmental impact statement for the propsed $550 million Lane Cove tunnel.  The 3.4km twin tunnel, which will join the M2 at East Ryde with the Gore Hill freeway at Artarmon, is expected to have a similar impact on the Lane Cove business area as the Gore Hill freeway had on the Artarmon industrial area.  But developers have not waited for the infrastructure improvements to occur, with several already experiencing success in the area.  Trafalgar Properties, for example, recently sold all eight industrial units in its Chaplin Estate for about $2,600 a sq m, which is comparable with prices achieved in North Ryde.

Improved travelling times and transport routes for business have no doubt assisted Lane Cove's growing popularity.  The M2 and Gore Hill freeway have reduced travelling times to and from the area, and the prosed tunnel will further improve this.  The realisation of Lane Cove's proximity to the city and the surrounding North Shore and the Hills Districts' affluent residential areas has contributed to its recent success, but the lack of industrial/business space int he area has guaranteed Lane Cove's coming of age.  Several more complexes are nearing completion within the Chaplin Estate.

Some of the new companies moving to Lane Cove include the wine distributor Pieroth, computer companies Namlee and Hypercom and property maintenance companies Mastercare, MPM and Glasscot Landscaping.

 

By Fiona Parker
"Shortage of vendors keeps prices firm"

It may only be two months into the new year but it is worthwhile asking: "How is the industrial maket shaping up for 2001?"  With talk of economic slowdown in the media, many commentators are suggesting real estate may be about to suffer.  But have people on the ground noticed any difference in the months leading up to Christmas and the first two months of the new year.  In our experience the answer is no.  The first most ntoable characteristic of the market is that there still remains very little property being offered for sale throughout Sydney's industrial areas.  In comparison, the availability of property for lease remains about 5 per cent throughout most of Sydney's industrial markets, a situation comparable with last year.

With the relatively low interest rates over the past few years there is no doubt that one of the major reasons for the discrepancy between availability of property for sale and lease is that it is simply cheaper to own at present rather than lease.  With the recent interest rate reduction and the possibility of more this year, there is no doubt that this trend will continue at least for most of this year.

For those vendors who decide to sell, this is of major benefit to them both in fewer properties on the market and the eventual price achieved.

The other point of interest is that purchasers have had to deal with the new tax system for over seven months.  What was very evident last year was that the "margin scheme" was used in the majority of sales we were involved in.  this year as the scheme becomes less effective in minimising the amout of GST payable, the majority of (GST registered) purchasers have simply paid the 10 per cent and claimed the amount back from the ATO.

 

By Daniel Bagdon
"A new mecca for homemakers"

Parramatta Road is undergoing a transformation. Previously considered to a hotchpotch (and dying) retail and industrial properties, Parramatta Road is fast becoming an area ideal for bulky goods retailers.

And the crucial point is that retailers are not committing to the traditional bulky-goods centres, such as the Moore Park Supa Centa and Christie's Homemakers Centre, but larger single-tenant buildings which previously housed industrial businesses.  The reason is simple: low rents and increasing population.

The inner west has experienced a dramatic increase in residential dwellings, bringing homeowners keen to renovate and furnish.  They need bulk retailers of such goods as furniture, bedding, floor coverings, lighting and kitchens.

On Parramatta Road, both land prices and rentals are substantially less than the more high-profile bulky-retail centres.  Operators are finding that the rental savings far outweigh any perceived loss in trading potential from not being in a centre.

Many observers are now comparing Parramatta Road with the bulky-retail strip on the Pacific Highway in Crows Nest.  Parking is available during non-peak periods, but more improtantly is unrestricted at weekends when business is at its peak.

The favoured area for bulky-goods retailers is east from Johnson Street, Annandale, to Broadway.  Rentals are $150-$200 per square metre for the typical retail store sized from 500 - 1,000 sq m.

A bulky-goods retailer can achieve rental savings of at lease half when compared to the major centres, but still have access to a large population with high disposable income.

 

By Graham May
"South's factories of yore at a premium"

A lot has been reported of recent about the transformation of South Sydney to Sydney’s new silicon valley or hi-tech precinct.  Certainly this is justifiable considering the number of transactions this year to tech companies: Nortel Networks' pre-lease of Grosvenor’s 8000 sq m Stage II at Sir Joseph Banks Corporate Park and PSI Net’s purchase of Colonial’s 17,000 sq m Mascot Central are just two.  Added to this are recently completed infrastructure improvements such as the southern railway, Eastern Distributor and fibre optic cable between Sydney and Mascot.

However, there remains a considerable requirement for the traditional industrial property that has characterised South Sydney, the older style factory or shed.  Under pressure from all sides the shed has become almost a rarity with substantial parcels of land being re-developed to suit the increasing appetite for "hi-tech" buildings.

While many of the original inhabitants of the older-style properties moved west many years ago for the lower rents, there remains significant demand from businesses requiring South Sydney’s proximity to the airport, port and city but who can’t afford the rents.

Vacancy rates for the industrial market are at their lowest level in more than 10 years and older style properties are probably the hardest to locate.  We know of several traditional companies requiring older-style properties that cannot find alternative premises. This has been the experience for Colonial Investments, which has experienced no vacancy factor with its recent leasing of several areas in its Alexandria Industrial Estate.

 

By Peter Taylor
"A tax on a tax - now that's unfair"

A lot has been said about how fair or unfair the new GST will be.  Arguments from both sides of the political fence have centred on its fairness or otherwise.  Yet those arguing against it on that basis of fairness conveniently ignore the inequity of stamp duty on property purchases.

Spend $500,000 on a property in NSW and get hit with a stamp duty bill of almost $18,000.  Spend $1 million and this rises to $40,490, with an additional duty of 5.5 per cent for every dollar spent over $1 million.  Invest in shares, however, and pay just 1.5 per cent in stamp duty.

The difference in rates between the two industries is hardly fair, not that I'm suggesting the latter rate be increased.  The property industry has attempted to put the spotlight on the discriminatory nature of stamp duty and the positive effects a reduction would have on the economy.

Although the recent State Budget abolished stamp duty for first home buyers spending up to $200,000, there is little tax relief for most in the property industry.  Furthermore, the inequity of stamp duty is only going to get worse.  From July 1, it will be levied on the GST-inclusive price of a property.  The States are not only guaranteed their share of the GST income, but they will get an automatic increase in the stamp duty.  This effectively is a tax on a tax.

Surely the State Government can provide the necessary legislation directing that stamp duty be assessed on the GST-exclusive price of a property?

Business should join together in lobbying for at least a reduction in property stamp duties to levels in line with other industries to ensure that such inequities are not expanded.

 

By David Taylor
"Stress-free way to be a landlord"  

Property management is often wrongly considered a simple matter of collecting rent and paying bills.  With good quality tenants who regularly pay the rent on time, owners have often considered a managing agent an unnecessary expense.  But there is more to professional property management than collecting rent and paying bills.  Arrears control, enforcement of lease obligations, market advice and feasibility analysis is an essential part of any property management service, however a new dimension will be added from July when the GST is implemented.

Many investors in multi-unit complexes, or several different properties, will also be required to determine at what point GST is payable and whether their lease agreements allow recovery of GST.  The GST collected from the tenant must be reconciled against that paid by the owner and forwarded to the tax office monthly or quarterly.

Owners may not have the time to look after the day-to-day requirements of an investment property, or portfolio, as well as collecting and reconciling GST payments.

Apart from GST issues, many investors are putting themselves at a disadvantage by not having a specialist property manager handle and co-ordinate their affairs.  For example, some owners are not aware that a body corporate does not insure a unit's contents, because the contents are not owned by the body corporate.

It is only when a problem arises that the owners realise that their carpet, air conditioning systems and even the paint on the wall is not covered by the body corporate's insurance.