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News release

Perth

Subiaco setting itself as strata hotspot for investors and owner-occupiers

10,947sqm currently underway or planned for development in 5 office projects


PERTH, 23 November 2012 – The rise and rise of strata offices in Perth’s professional districts is increasing its momentum following a review of projects being marketed by project developers and builders.

Leading the trend is strata hotspot Subiaco with at least five substantial projects at the eastern and western ends of Hay Street comprising about 10,947sqm of office space currently on offer to owner-occupiers and investors.
 
Noting the evolving trend, Jones Lang LaSalle sales negotiator, Andrew Langsford said that the trend appeared to be accelerating thanks to a combination of factors.
 
“Obviously, the shortage of office space and rising occupancy and car parking costs in the CBD and West Perth has resulted in significant rental escalations over the last 12-24 months. These factors have been a catalyst for developers and buyers looking at high growth fringe-CBD locations such as Subiaco which offer attractive, affordable and new alternatives close to public transport and with exceptional local amenity.
 
“Smaller businesses such as legal, engineering, accounting, marketing and software business owners are seeing leasing and borrowing expenses at or near the cross-over zone, particularly with the RBA cash rate now at an historical low of 3.25 per cent.
 
“Added to this, proposals for major office developments are being challenged by significant financial pre-commitment covenants and construction timeframes.”
 
Mr Langsford, whose company is marketing Match’s $13million two-level 1,732sqm Rhythm project at 125 Hay Street, Subiaco, also noted that the new generation of predominantly tertiary educated business owners had a far deeper grasp of financial dynamics and were prepared to take a more entrepreneurial stance than their predecessors who often treated office accommodation as a line item expense.
 
“For those in a sound personal or corporate position the idea of borrowing against a bricks and mortar commercial asset with strong depreciation benefits and which could be underwritten by their own company’s accommodation needs is within the realm of possibility,” he said.
 
"For example a 73sqm professional office plus two car bays in the Rhythm project with an asking price of $525,000 or $7,190 per sqm would be expected to generate an annual net income of approximately $42,500 per annum, which when combined with an estimated depreciation benefit of about $9,000 would provide a very attractive initial return of around 8.25 per cent before interest.”
 
Mr Langsford said that owner occupiers and small cap investors were also increasingly savvy in respect of acquisition costs.
 
“Front-end pricing is still important, but there is an increasing focus on comparative pricing such as the cost per square metre, which in Subiaco can range from $7,000 per sqm up to $9,000 or $10,000 per sqm and can be a critical factor.
 
“Also, and as we have found with Rhythm, where three quarters of the initial sales  have been acquired by owner-occupiers, buyers are increasingly energy cost and design sensitive. Interest in this aspect has been led by the major occupiers, but we are now finding that smaller users are closely attuned to the issues.
 
“Gone are the days when buyers were content to acquire a fluoro-lit cave with minimal natural lighting and sterile common areas. Similar to the big end of town, a building’s external and internal design features along with the standard of office fit-out is now a direct reflection of company culture and branding,” said Mr Langsford.
 
He said the rapid growth of self-managed superfunds had provided many smaller and medium sized business owners with a vehicle to invest in income generating medium to long-term property assets.​