Commercial in Cremorne

I've noticed over the last couple of weeks big advertisements for buying retail and office units in a new development in Cremorne in Sydney. While I'm not looking to buy there or at this moment, I am generally interested in commercial property possibilities.

The complex is on Military Road (the main drag there) and properties range from affordable ($200K or so) up to a couple of mil. The retail properties seem to be leased already, but I'm not sure about the office ones.

The ads state a net return of 5%-7%. I'm just wondering if that would be considered reasonable for commercial property of this type. And would "net" return be after all likely costs (except personal borrowing) or just after their management fees? I gather tenants pay the outgoings, but there must still be insurance and other costs involved.

I'm just interested in thoughts on whether something like this could be a good investment or unlikely. Military Road can be a very busy road, and it says there's reasonable parking, but without spending more time there, I'm not really sure how popular a shopping area it is or what sort of vacancies shops and offices have there.

GP
 
Which one on Military road is it? If it's the one built by Mainbrace, my company put all the steel reinforcement into that job. I worked on it for a few months. When that job started they were excavating and the building next door collapsed onto military road at 2 in the morning :eek:

My uncles company did the reo at the job a bit further up military road. That one was by Austins Australia. They went broke a few months back.

There is parking around Cremorne but you but you have to go to the back streets. There's many spots where you can park for 1-3 hours. Seemed moderatly busy around there, a lot of yuppies and business folk running around :cool:
 
ok180 said:
Which one on Military road is it?
It says "Cremorne Town Centre, 287 Military Road", apparently opposite the Orpheum cinema.

Actually, you can see it here.

Some of the cheaper shop prices given in the paper:

ATMS: $115K each
Shoes & Access: $240K, 5 x 5 lease.
Beautician: $384K, 3 x 2 lease
Florist: $432K, 5 x 5 lease.
Sushi Cafe: $650K, 5 x 3 yr lease.
Bakery: $760K, 5 x 5 lease.

And there are a few offices between $170K and $350K with a variety of leases.

GP
 
Hi Great Pig
I thought the market was offering commercial property returns around 10%, which then compensates for the lower (than res) capital gains, and all outgoings should be paid by the tenant. IMPO, in retail, trendy is a worry, because trends shift, or the flock of grazing alpacas move along and park their audis somewhere else when they get bored. personal opinion of course. :D
cheers ;)
crest133
 
crest133 said:
I thought the market was offering commercial property returns around 10%
Isn't that gross return?

Although I don't know what the typical difference would be between net and gross for commercial. And much of the residential stuff I've seen around where I live recently has only had about 3% gross return (ignoring CG).


IMPO, in retail, trendy is a worry, because trends shift, or the flock of grazing alpacas move along and park their audis somewhere else when they get bored
I haven't been to that area for years, so I really don't know what the trends there are like. I did once live on Falcon Street (essentially Military Road before it gets trendy :D) and I remember the traffic used to be bumper to bumper on Saturday mornings in summer with everyone heading out to Manly. I suppose they mostly wouldn't have stopped at Cremorne though.

And one thing that did occur to me: if they really are such great investments, would they need to be taking out full page colour ads in the weekend newspapers to sell them? :confused:

GP
 
Hi Great Pig
With most of the commercials I've managed, the tenant paid all the outgoings viz.,. council rates, water consumption, so there was not much for the PO to pay from the rent except REA fees (7.7% incl GST) and building insurance.
Owners of motels which are being leased out lately (25 year leases) are receiving returns around 9% - 10% ROI , again with little if anything to pay as expenses.
cheers
crest133
 
Crest133,

Thanks for the info.

Perhaps the relatively low return then is supposed to be compensated by expected CG in that location.

GP
 
Hi there,

Have sold residential and leased commercial in the area and that building.

The building in question is the old Metropole Hotel which was strata titled and re-skinned a few years ago. The remodelling was not done particularly well as reflected in the substantial strata rates.

Cremorne is a fringe office area and fairly volitile retail area. As such the additional risk involved as compared with North Sydney or Sydney CBD should be reflected in a higher yield. By the way the net yield would be expected to be Gross Yield - Outgoings, Rates and statutory charges. The management charges would not usually be considered and as such would probably further reduce the net figure. Not sure exactly what the yield should be but get ready to rent it yourself when the tenant goes because vacancy rates are at a national high in the LNS and the fringe is the first to hurt and last to lease in such a market.

On a lighter note .... generations of seventeen year olds bought their first beer in the Metropole (Megahole) bar located on the ground and first floors. In recent years it has been more of a last watering hole on the way home where a one can indulge in some pianoman singalongs and fraternise with middle age divorcees.

Anyway good luck with it. Commercial property looks interesting at the moment but I think there may be some better opportunities further abroad.
 
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