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Keeping watch on agent-free property sales

AN increase in institutional ownership of major commercial and retail properties in Perth led to a rise in the number of sales completed in 2002 without an agent’s involvement.

While there’s minimal concern among agencies about this shift, one industry source said it represented a reasonable trend in the industry.

Among last year’s major transactions to be completed without an agent were the sale of the second half of Allendale Square and the Telstra building at 80 Stirling Street.

“In a recent big submission they [the clients] were selecting from five agents and five merchant banks,” the source said.

“This allows the client to split the property up and set it as an investment vehicle.

“It’s just another way of doing it but it’s not a huge trend.”

Colliers International research manager David Cresp said deals with no agents had become more common.

“When 50 per cent of the building is already owned, because the owners are talking to each other on a regular basis, it’s not uncommon for no agent to be involved,” he said.

“It’s been something that is becoming more common, particularly when they’re transactions between institutions.

“However the majority of institutions still outsource management; some are taking it in house.

“The agencies will always be involved in leasing deals, and although some institutions are taking management and leasing in-house on the east coast, it’s not the case in Perth.”

The CBD office market in Perth had a reasonable year in 2002 according to Mr Cresp, despite fairly weak demand.

“It was an interesting year second-guessing where people were going to move,” he said.

An active leasing market with a number of major leases up for renewal hasn’t done much to support a number of new developments mooted for the CBD, however.

“To date no major [new] buildings have got off the ground despite lots of talk,” Mr Cresp said.

“It hasn’t been through a lack of effort.

“QV1 has done incredibly well, attracting new tenants and setting new benchmarks for rents.”

He said QV1 had been the real winner last year.

“I think this year will continue to be a reasonably difficult year with demand not expected to pick up until 2004 or 2005,” Mr Cresp said.

Several major office developments in West Perth, including the Phillips Oil building and NRMA House, are expected to affect the city market and open up the A-grade office space sector.

“Decentralisation will start to have a real effect on the market,” Mr Cresp said.

“In A-grade properties a few holes will keep that sector fairly competitive.”

Office property sales were very strong last year at the lower end of the market as a result of a weak stock market and global security jitters.

FPDSavills research manager Chris Freeman said there was very strong demand for properties priced at $3 million and below.

He said a number of sales to institutional buyers demonstrated the considerable interest in the local property market.

“If the Perth Convention and Exhibition Centre [office] deal goes through that will make the market for any new buildings in the city much tougher,” Mr Freeman said.

“There was some trepidation about an over supply of office space in 2001.

“The PCEC deal will give the market a bit more security.

“It will make the developer’s job harder and if they want to proceed they will have to do so with a smaller pre commitment.”

This time last year a number of new developments were actively pitching for leasing pre commitments, including the Hawaiian Management Group’s Project Future 239 and the Westralia Square office development.

CB Richard Ellis senior managing director Peter Agostino said he expected the 2002 market conditions to continue into this year.

“We’ve had a situation of limited supply and very good demand,” he said.

“I expect fairly similar conditions because we’ve got a fairly stable interest rate environment and to a large extent I don’t see anything to drive the market.”

In the residential sector of the market Mair Projects marketing and development manager Nicholas Wells said messages directed at the Sydney and Melbourne markets were negatively affecting the market in Perth.

These messages about the danger of paying too much for property in a boom market have slowed sales in the residential market, he said.

“On the up side it’s still a good time to buy property,” Mr Wells said.

“We’re finding that we’re getting more inquiries from the owner occupier market than the investment market. Investors tend to have more of a knee-jerk reaction to negative press.”

Mr Wells said he expected a number of residential projects to be shelved in reaction to a cooling off in demand this year.

“Those developers that have followed the traditional rules, the right location, the right product will still sell,” he said.

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