OWNER-OCCUPIERS and inves-tors are increasingly looking to the commercial sector as the capital growth in the residential market begins to plateau.
OWNER-OCCUPIERS and inves-tors are increasingly looking to the commercial sector as the capital growth in the residential market begins to plateau.
The commercial property sales volume and the average sale price are at historical highs, and the trend is predicted to continue in to 2005.
Burgess Rawson managing director Geoff Potter said the shift had been noticeable during the past 18 months to two years.
“It is becoming increasingly cheaper and easier for people to own their own offices, and the owner-occupier market is being driven by low interest rates,” Mr Potter said.
“I can’t see a change in the marketplace in the next year, and with office rents increasing, there is not enough product to meet demand – the major challenge is to get people to sell, particularly in investment property.”
Mr Potter said commercial property was an attractive investment for several reasons, including: a higher rental return than offered by residential property; medium to long-term capital growth potential; secure income streams; and tenants’ responsibility for outgoings.
“With rapid capital growth disappearing from the residential market, purchasers are looking for an alternative – this is involving things like super funds,” he said.
Last year, industrial property sales represented 34 per cent of all commercial sales processed by the Department of Land Administration. A further 27 per cent was commercial offices, 26 per cent vacant commercial land, and 13 per cent retail.
Commercial land sales grew most during the past year, with the average sale price up 31.5 per cent to $345,600.
CB Richard Ellis research manager Andrew Woodley-Page said there was huge interest from the investment market in the commercial sector, but very little stock around.
“There are a lot of related party transactions going on, particularly in the retail sector,” he said.
“Retail represents only a small portion of commercial sales because stock is so tightly held.
“In terms of the office market, it is becoming incredibly tight, and we could see more companies building their own offices on the fringes of the CBD along the lines of CSC on Hay Street Subiaco, and Hatch on Stirling Street.”
Mr Woodley-Page said there were several opportunities in fringe suburban areas such as Subiaco, Leederville and Burswood for new office stock, in addition to redevelopment opportunities for some sites on the north side of Hay Street.
Real Estate Institute of Western Australia President Greg Rossen said the commercial property sales market reflected the strength of the economy.
“The commercial property sales market has experienced three successive years of growth in average sales prices,” he said.
“Since 2001 the average sale price of commercial properties in WA has risen 33 per cent.
“The shortage of properties for sale and the strong demand for properties is likely to add to the pressure for continuing growth in the commercial property sales market in 2004-05.”
