The right time to go commercial
- Thread starter younguns
- Start date
Obviously, risk....the lower price bracket properties = more risk, difficult to rent out/find tenants and generally of less exposure I guess.
I've always found in the warehouse department, larger land/warehouses usually equates to lesser $ per m2 than smaller ones, bang for your buck I suppose.
Another factor is the $ that it reaps in, even if the lower priced property had higher yield than an expensive one with lower yield, the latter would still bring in more $ overall if you can withstand the inherent cash flow risks.
Probably one of the things I've heard stressed a lot is vacancy rates and this is why generally the higher bracket properties are recommended over cheap ones. when I was in the market for a commercial property, I had a choice between a shopfront and warehouse, the former was way expensive than the latter, I missed out on the shopfront, but with the warehouse, it was not uncommon (and the RA told me this upfront) to expect vacancy rates of at least 2-3 months minimum if I had to find new tenants.
Could not disagree with you more.
If its not already blatently obvious, I'm a commercial leasing agent in the lower north shore with the majority of properties in the North Sydney Office market. We also deal in some small to medium sized sheds in Artarmon Industrial Area so I can only offer my comments in this area.
I have dozens of landlords who have well located large office suites (500m2 and over) that have been vacant for anywhere between 1-3 years. The small-ish suites under 200m2 lease well and the stock levels within the 80-120m2 almost non existant.
Many of the larger suites have just been or are the process of being carved up into smaller suites (case in point http://www.ljhooker.com.au/3KVH72).
My boss who has been in the commercial office market in North Sydney for 40 years only buys and owns suites under 120m2 with a preference for 60-80m2, reason being their easier to lease and have shown a consistant high return over the long term.
I dont deal in large sheds or offices/retail anywhere other than the Sydney's Lower North Shore so I can not comment whats happening there but the North Sydney total vacancy rate is running around 11% down from 13-15% 18 months ago. If you ignored the institutional market (generally 300-1500m2) vacancy and only looked at the strata market you'd find a vacancy rate of around 8%, down from around 10%-11% 12-18months ago. There's been a huge rush on leasing suites since September last year and if it continues which I think it will, we should have a vacancy rate of 5%-6% by this time next year.
Just my 2 cents anyway
There's no sarcasm here
Yeah, sure mate.
Don't get me wrong, I do have fun trying to identify the sarcastic comments. Part of negotiating is trying to read people doesn't it? Sometimes I feel like the Sheldon character (not as smart though) on 'The Big Bang Theory' identifying sarcastic remarks. @shady. Thanks for sharing your experience on the lower priced commercial property. Just want to ask how the strata titling works in commercial property. When I did a subdivision course from the Department of Planning, I didn't know that you have to apply for permit on subdividing the inside of a building. I am just starting my journey on the commercial side of property and even though it's hard for me to comprehend at the moment, I know I'll get it one of these days.
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Pretty much the same way as with resi strata. Owners are represented through the executive comittee who then appoint building managers, cleaners and strata managers.
The majority of buildings in my area have been purchased as a bog lot, carved up, converted into strata lots and sold off. This is when the unit entiltlements are set for each lot number. The point of the storey is you can have 2 identicle suites with a huge difference in strata levies.
Here's an example.
http://www.ljhooker.com.au/3KMH72
http://www.ljhooker.com.au/39EH72
2 suites exactly the same size, shape and position. 1 is on level 5 the other is on level 3 (from memory). The suite on level 5 has strata fee's of around $12,000pa the suite on level 3 is about $18,000pa.
The reason is that the suite on level 3 is over 2 lot numbers even though it has never been sold or tenanted seperately when it was originally carved up it was made into 2 lots and 2 seperate unit entitlements. The suite on level 5 is one lot.
Well, I was referring to shops in my last post. My forte is not in offices....or anything outside warehouses...
It is also highly dependant on area, which is my case is suburbia Melbourne.
I must stress one of the most often overlooked aspect of commercial properties is TENANT QUALITY....you almost always ride the economic wave with them.
search this section for threads started by dazz. a few years back he purchase a warehouse and large yard full with (from memory) 40 tonne of rubbish that he had to remove ... got in a great tenant in his, now, nice clean yard ... value improved 100% (or thereabouts) ... and the rest is history.
here's a good yarn while i'm looking for the other:
http://www.somersoft.com/forums/showthread.php?t=56324&highlight=dazz
i think this is the one - if not, have a good read while i'm still looking:
http://www.somersoft.com/forums/showthread.php?t=34994&highlight=dazz
still not sure if i've found it - but another very informative read:
http://www.somersoft.com/forums/showthread.php?t=22514&highlight=dazz
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