CHANGING market conditions have fuelled a trend towards strata property in the commercial sector, as owners respond by offering floors for sale as strata-titled stock to entice a growing number of financially constrained potential buyers.
CHANGING market conditions have fuelled a trend towards strata property in the commercial sector, as owners respond by offering floors for sale as strata-titled stock to entice a growing number of financially constrained potential buyers.
According to Property Council of Australia analysis of the commercial market, volatility in the Australian equities markets and borrowing constraints imposed by the banks is making strata office investment more attractive.
At the same time, a number of owners of office buildings are offering floors for sale in buildings as strata titled stock, as they look to adapt their offering to suit current market conditions and downgrade their exposure to commercial property.
Property Council of Australia executive director Joe Lenzo said investors could move towards direct property returns over shares and term deposits in the current climate.
"We are seeing owners of small, successful local businesses with sufficient superannuation funds purchasing strata office to avoid increased rents escalations as well as acquiring a long-term income producing asset," he said.
"Potential private purchasers of office buildings are currently facing finance constraints that limit their ability to acquire complete buildings.
"Given a rental yield of around 7-8 per cent, strata office is an attractive investment option compared to term deposits, Australian equities market and superannuation."
GDI Property Group managing director Steve Gillard said that, up until recently, strata titling of commercial buildings had been more popular in the eastern states than in Western Australia.
GDI is currently selling the last of its strata offices in the recently renovated 12 St Georges Terrace, and is potentially eyeing strata for 251 Adelaide Terrace after undertaking extensive renovations in the building.
"People aren't as comfortable with it as they are in the eastern states," Mr Gillard told WA Business News.
"In New South Wales, Queensland and Melbourne, it's very popular to own your own office."
Mr Gillard said some companies chose to buy a strata suite to avoid rent increases with buying, in some cases, cheaper than paying rent.
Figures from the Property Council office market report show 77,504 square metres, or 6 per cent, of stock in the Perth CBD and 43,517sqm, or 11 per cent, of stock in West Perth is currently strata titled.
In proportion to the number of active office properties, 11 per cent of Perth buildings and 19.5 per cent of West Perth buildings are strata titled.
During the boom, the amount of strata stock remained fairly static, however the tide has now started to turn, according to the Property Council.
About 3 per cent, or roughly 10,000sqm of new office developments in the Perth CBD are strata titled, including the Equus development at 580 Hay Street by Birchwood Consolidated.
In West Perth, 9 per cent, or 2,954sq m, of new office developments are strata titled, including 1171 Hay Street by Ridgecroft Holdings and Bullfinch Nominees, and 1174 Hay Street by Diploma.
Strata titled office space is currently on the market for between $10,000/sqm and $11,000/sqm for new Perth CBD and West Perth developments.
New suburban strata developments were currently seeking between $7,000/sqm and $8,000/sqm.
