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Landlords move to cut vacancy exposure

LANDLORDS are moving to reduce their exposure to vacancies according to the September WA Property Review by valuation firm Herron Todd White.

Low commodity prices reflected in a fall in mineral exports and a twenty year low in gold prices are causing many mining companies to seek lower rents outside the CBD.

“Landlords appear to be employing strategies that will reduce their exposure to vacancies by sacrificing rental growth. The focus therefore continues to be capital growth through stronger yields and a continuum of tenancies to preserve stable cash flows,” the review says.

Commercial CBD office vacancies rose 1 per cent to 12.3 per cent according to the latest Property Council vacancy report.

Recent research by CB Richard Ellis also confirmed the trend of reduced office leasing activity by the resource sector.

The research indicated that the resource and related engineering sectors contributed just 10 per cent of leasing deals in the Perth market in the six months to 30 June. This was down from 38 per cent in the full year to 30 June.

Normally the resource sector accounts for 50 per cent of leasing deals.

Recent commercial sales include an office building currently under construction on the corner of East Parade and Brook Street in East Perth.

The property, which is 80 per cent leased for ten years to P&O, sold off the plan for $7.5 million reflecting an initial yield of 8.93 per cent.

The Brambles six hectare site in Dowd Street, Welshpool sold for $6.3 million, while the 2,047 square metre 3M building, at 4 Gould Street, Osborne Park sold for $3.95 million reflecting a yield of 8.9 per cent.

According to Herron Todd White Investors continue to seek out redevelopment sites as being the best source of return.

The former Disability Services Commission site in Ord Street, West Perth, has been purchased with a view to redevelopment as eight townhouses.

Two eight-storey residential apartments and a site in Parliament Place sold for $1.22 million to be redeveloped for mixed residential and commercial uses.

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