CBD Office Blocks

[Dazz]

Hiya,

Being new to the forum, I performed a search on the above and came up empty handed.

Does anyone have any direct experience in purchasing full office blocks within the CBD of a capital city.

Our group is currently perusing several deals in both Perth and/or Melbourne and would appreciate any feedback on the experiences of others in this regard.


Cheers,

Dazzling

No point having a cake if you can't eat it...

 

[Hellman]

Commercial office is okay at the moment but next year most cities will be having major office space come online, and when those things are vacant, they can really hurt (thats why I leave it to the superfunds). Melbourne has the 2nd highest amount of office space comming on-line (with sydney comming in first - Syd. also has a 10% vacancy rate; so with all this development expect to see Syd have a very high vac. rate).

I much rather Perth, but be aware cap gains might not that be high in the comming years (I know some investors who are selling out of that market).

Me - I like commercial buildings more in the 'Suburbs/MiniCities' (Chatswood/Parramatta) as once a company is in there they dislike to move out, where as CBD it is easier to move out (i.e. I have seen companies move floors because one super fund owned one and another super fund owned another - and one offered a cashback incentive and found a 'new' tennant!).

Hellman

 

[geoffw]

If you're looking at full office blocks, you're way out of the league of many in the forum.

The last time I looked at Melbourne, vacancy rates were very high- and many tenants were being given many incentives to sign leases (six months free rent or refit). That made it hard for people with single offices and small pockets to compete.

 

[The Y-man]

...and I wonder if many of the big players have already signed up the big tenants (large listed corporates and Government depts) on very long term leases.

Cheers,

The Y-man

 

[Dazz]

Thanks guys...I thought it would be pretty thin on the ground. It looks as though these forums attract mainly private people.

We are mainly concentrating on near or fully leased out premises. Yes Y-man, the tenants are typically A grade corporates and State Govts.

The yields seem to be attractive, 9 or 10% nett. Lease terms vary but are typically 3 to 7 years.

Our data shows Perth to be the best at this point, which is fortunate as this is where we are based.

Who knows where the big super funds get together and have a chat ??

 

[see_change]

Who knows where the big super funds get together and have a chat ??

I here some conversations at parent gathering of the private schools my kids go to.

One friend acts as a deal maker for a listed property trust group. His company specialises in finding properties that are undervalued for what ever reason and working out a way to improve the value. eg one prominent building on Sydneys north only has easy access for traffic going to the City. This was perceived as a problem and was the reason why half the building was empty . They fixed the problem by buying a block that came off another road and gave them side access. As a result they were able to rent the rest of the building , increasing it's return and value ( it had been half vacant for a couple of years ) without affecting the value of the other block.

This deal was then floated off into a new property trust with other deals , which the parent company manages.

Similar concept to what many of us try to do , just on a bigger scale.

See Change