New Office in Adelaide - Any thoughts?

[Pushka]

We are looking at purchasing an office space in this building in central Adelaide. Cost around $190,000 plus $2000 pa outgoings; has plumbing for a medical/dental practice. Would house 2 workstations, dedicated office and reception area. Has heated pool on rooftop, gymnasium, on site child care facilities etc etc. Ready March 2009.

It was released to VIP buyers this morning, with 3 agents and 30 minute appointments, of the 54 buyers this morning, over 30 of them have signed up. Interstate people coming this afternoon, and it will be released to the public next week. It is being marketed as small office suites so that there is a low entry level - suspect it is appealing to mum and dads with DIY super.

We could our business into it (we need it right now actually) or rent it out - we would purchase it through our Super Fund (cash purchase no loans involved).

http://www.auroraonpirie.com.au/


What do you think? Are we crazy or not?

 

[Xenia]

I assume the $190,000/year is the rent, what is this based on? Are there tenants available or are you buying it on vacant posession?.

What is your purchase price?

What exactly are you buying one office suite or the whole building?

I'm not clear on what is on offer here?

 

[JIT]

I assume the $190,000/year is the rent

Oh, I thought it was the purchase price (for a single strata office suite)! It is going to be bought vacant, and if they find a tenant, that's good - if not, they can use the property for their own business. That's what I thought anyway.

I was going to ask what the cap. rate is for similar strata office properties at the moment? Then use this to work out expected rental and yield.

And/or, what is the rent/m2 for similar strata office properties and use this to work out the expected rental and yield for this property based on its size.

Does that make sense?

GSJ

 

[JIT]

It was released to VIP buyers this morning...

I wouldn't put too much significance on this one.

GSJ

 

[dcarr]

I got the brochure for this in the mail.. probably due to subscription to investment mags. So yeah, VIP doesn't mean much

Yes, $190k is the starting price to own (not rent) the smallest space, which I think it was 35m2 from memory.

Kind of interesting as a home for your small business esp. if you can write off all the interest payments, but as an IP the $1 mill spaces would be the ones to secure the serious long term commercial tenants I imagine.

 

[Pushka]

Hi there, sorry if I wasnt clear about it. $189k is the purchase price for a strata title office space - and yes, the VIP doesnt mean a great deal - just that it concentrates the interest so to speak. Makes it look busy and all.

Because it will be purchased through our SMSF there wont be any interest payments as SMSF cant borrow money, so kind of a different scenario. If our business rents it, then the money we pay as a business as rent, goes straight to our SMSF rather than a third party landlord.

So I guess the issue is all about Capital growth, paying 'ourselves' the rent and not someone else, and chances of resale in a few years time.

 

[Dazz]

What do you think?

Well if dcarr's figures are correct....190K for 35 sqm....then I think $ 5,428 psm of NLA is expensive, through the roof in fact - for Adelaide.

We just had a crack at something and missed out in the Adelaide CBD. It was a tad larger than what you are looking at, so I suppose scale factor comes into it, but it sold for a rate of $ 2,303 psm of NLA.

Maybe this is being marketed as a "boutique" opportunity, with the equivalent "boutique" price being asked. Dunno.

 

[Pushka]

Thanks Dazzling - yes it is being marketed at boutique style, but your thoughts are very helpful. Think I might pass on this one.

 

[dcarr]

prices

Well if dcarr's figures are correct....190K for 35 sqm....then I think $ 5,428 psm of NLA is expensive, through the roof in fact - for Adelaide.

You had me worried about my memory! So I went and dragged it outta the recycle pile.

Commercial Office Suite Size & Price Range
Under 35m2 =====> Under $250,000
35m2 - 55m2 =====> $250,000 - $500,000
55m2 - 100m2 =====> $500,000 - $750,000
100m2 - 200m2 =====> $750,000 - $1,000,000
200m2 plus =====> $1,000,000 - $2,000,000
Medical Suite =====> $2,000,000 - $3,000,000 (or $3,000,000 Plus)

They do advertise the "Latest High Speed Elevators". Perhaps this is the ultimate in New York skyscraper transport technology for this 14 storey building! Woot!

And yes a "Childcare Facility#" ... oh, whats that footnote? "# subject to statutory approvals".

 

[markp]

You had me worried about my memory! So I went and dragged it outta the recycle pile.

Commercial Office Suite Size & Price Range
Under 35m2 =====> Under $250,000
35m2 - 55m2 =====> $250,000 - $500,000
55m2 - 100m2 =====> $500,000 - $750,000
100m2 - 200m2 =====> $750,000 - $1,000,000
200m2 plus =====> $1,000,000 - $2,000,000
Medical Suite =====> $2,000,000 - $3,000,000 (or $3,000,000 Plus)

They do advertise the "Latest High Speed Elevators". Perhaps this is the ultimate in New York skyscraper transport technology for this 14 storey building! Woot!

And yes a "Childcare Facility#" ... oh, whats that footnote? "# subject to statutory approvals".

Interesting trend? Is this where office prices are heading in Adelaide?

 

[Pushka]

It has a one page ad in "The Weekend Australian' Magazine section, or was it the main paper - too many Champers last night! I didnt proceed, but might have a look in this week now that it is 'publically open' to see how sales are going.

Re the Childcare facility - there was a youngish (well, anyone under 40 is young!) couple looking at the plans for the Centre, as though they were looking at opening the business. They got to have their own table - and were busy ringing people on their mobile, calculators being punched in and people were fussing around them.

They are marketing this aspect quite heavily with no mention of any provisos, so if it doesnt go ahead I think there will be some issues with false advertising.

I still have a bit of hankering for this given our own business needs, which are different to the average property investor - ie we run a separate business too, which would really work on this site. But glad I didnt plunge in and get sucked in by the hype!

 

[jopie]

Didn't the original design get knocked back recently due to the proposed height (exceeding regulations)?

What has developed since?

 

[Pushka]

Didn't the original design get knocked back recently due to the proposed height (exceeding regulations)?

What has developed since?

Yes, Adelaide City Council did it again! I think the developers response was that the top floors hadnt been sold anyway so it was literally 'back to the drawing board'. I would have thought that council approval had been obtained before all the sales started though!

 

[Merovingian]

ACC Councillor Ann Moran, who usually vetoes good development projects, surprisingly supported this one.

Upon denying this development, I recall the State Government making a few comments regarding the ACC holding back necessary developments in the Adelaide CBD. The ACC is too NIMBY focussed, in my opinion.