Skip Ribbon Commands
Skip to main content

News release


On-going low interest rates and the quest for strong returns draws investors to Perth’s strata office market: Jones Lang LaSalle

$15.5 million in CBD and suburban offices transacted since January 1

PERTH, 24 April, 2013 - Jones Lang LaSalle has attributed low interest rates to a surge in sales in Perth’s strata office market which had seen ten transactions negotiated by Jones Lang LaSalle worth more than $15.5 million since the start of 2013.

The latest of these deals was two strata units at the Forum Business Park in Canning Vale at a sale price of $1.05million and negotiated by Jones Lang LaSalle’s WA Sales Negotiator Andrew Langsford.
“Leased investments are becoming increasingly sought after as the difference between interest rates and investment returns widens. The increased competition for these assets has resulted in downward pressure on yields and higher values for many sellers looking to capitalise on assets with strong leases,” said Mr Langsford.
Mr Langsford said this was demonstrated by a comparison of sales campaigns for two office properties over two different time periods - 160 St Georges Terrace, for which the sale campaign commenced in 2009, and 41 St Georges Terrace, which commenced in mid-2012.
“These very similar projects produced average yields of 9.9% and 7.9% respectively. The issue now for investors is finding leased properties. It is apparent that demand for investment stock in the sub-$3 million market far outweighs supply. Some investors are now considering buying vacant property, with a view to leasing it out.
“Commercial property with current yields ranging between 7-9% are becoming more and more attractive to investors when considering returns from other traditional investment classes.
“According to Canstar, the maximum rate for a $250,000 deposit on a 24-month term is 5% so investors are looking beyond the banks for a decent return. Superannuation has left many investors wanting better performance,” said Mr Langsford.
Australian Prudential Regulation Authority figures show the 200 largest superannuation funds have returned, on average, -0.9% between 2008 and 2012, much less than the 9 year average of 4.9% from 2004.

The ASX 50 has produced some reasonable returns over the last 12 months. The average net yield for the bank sector is around 7% while Telstra offers an attractive and sustainable fully franked yield of above 6%. Many investors are however still uncomfortable with current market volatility and the increased risk of capital loss despite the yield.
“Perth’s constrained office market supply has reduced traditional risk concerns. This is combined with an investor’s ability to exert a level of direct control in terms of tenant selection and input into the lease terms.”
Mr Langsford said that like all investment classes, commercial property was not without risk – and investors need to consider driving factors such as security of tenant, location, condition of the property, zoning, tax benefits and liquidity.​