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A difficult diagnosis

THE troubled corporate medical sector hasn’t presented many exciting property opportunities in recent years, however some fresh sea air might be just the cure for this ailing commercial sector.

Market analysts maintain movement in this market sector remains difficult to predict, despite the strong yields reflected by the sale this year of a number of large medical centres around Perth.

Due to the problems associated with the corporatisation of general practices, some centres around the metropolitan area have closed their doors after failing to attract tenants.

Location is a key factor in the success of medical centres in Perth.

Herron Todd White (WA) managing director Garrick Smith said securing doctors away from the suburbs along the beach had proved difficult.

“There was a centre in Rockingham that failed to attract any interest, they only seem to work in certain areas, and that’s basically along the coast,” he said.

“Attracting doctors inland is proving difficult, according to the experts.

“Three or four years ago smaller medical suites were selling with yields of between 8 per cent and 8.5 per cent.

“In general you’re unlikely to find anything under 9.5 or 10 per cent now.

“Rents have grown quite significantly and I believe it has got to a stage where the difference between a medical centre and an office can be $150 a square metre.

“In suburban commercial space you’re lucky to get $150sq m; with medical centres you’re lucky to get anything for less than between $200 and $250.”

For property investors in this market the strength of the investment is dependent on the security of the tenants or the doctors and aligned health professionals.

“There have been a couple of recent failures,” Mr Smith said.

“There was a complex in Gosnells that only lasted about nine months.

“Both of the [failed] centres had 50 per cent filled but found they just couldn’t sustain the rentals because they couldn’t lease the remaining space.”

The failure of centres such as that in Gosnells has surprised some property analysts, as on paper the demographics of the area appeared to support such an establishment.

“If you can pick up anything under $500,000 on a 10 per cent return I think it’s a good investment and it’s probably more secure than most other occupations,” Mr Smith said.

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