Commercial

<p>The Brisbane City Council has just received an exciting new commercial development application, with a proposal lodged over the vacant block at 166-188 Breakfast Creek Road, Newstead, next to the Bunnings.&nbsp;⁣</p>

<p>The main 3,686 sqm block of land was offloaded by Bunnings in 2017 for $13,475,000. It was bought by Associated Finance Pty Ltd, whose directors Martin Ward, Sophie Moore, Keith Thornton and Denis Stark are part of the ASX-listed Eagers Automotive giant.<br />
⁣<br />
Designed by Arkhefield, the eight&nbsp;floor building features almost 19,000sqm of lettable area, a child care centre, day spa, ground floor retail tenancies and a lush rooftop terrace within the leafy, subtropical commercial scheme.</p>

<p>&ldquo;The intent of the development is to support the continued growth and revitalisation of the Breakfast Creek Precinct, and of the gateway to the inner city more broadly,&quot; the application from Mewing Planning Consultants read.</p>

<p>The proposal sits five&nbsp;commercial floors atop a striking podium, and is capped off by a heavily landscaped terrace that includes an artificial lawn space and a stage/band platform. Each commercial floor also contains river-facing balconies which are oriented to capture the views of Breakfast Creek, Newstead House and the Brisbane River.&nbsp;⁣<br />
⁣<br />
Designed by Arcadia, they noted their intention to use a lighthouse as the basis of their landscape narrative - aiming to have the building serve as a beacon for those entering Brisbane City from the north along Kingsford Smith Drive.&nbsp;⁣<br />
⁣<br />
The building would certainly be a nice addition on the block which has been vacant as long as I can remember, and serves as a reminder that Newstead is booming across every sector.&nbsp;</p>

<h2>Developments in Newstead</h2>

<p>[smartcode_project:default project_id=90553]</p>

<p>Mirvac have recently released their latest tower in their billion dollar Quay Waterfront Newstead development.</p>

<p>The latest tower, Sky Precinct, located alongside the Brisbane River, join&#39;s previously completed stages Pier, Park and Unison as part of the grander Waterfront Newstead community.</p>


Designed by Arkhefield, the eight floor building features almost 19,000sqm of lettable area

Joel Robinson

Newstead set for new commercial centre

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<p>GUEST OBSERVER</p>
<p>Woolworths shareholders have had a torrid couple of years. The company’s market capitalisation is down around a third since mid-2014 – quite a hit for a company once worth almost A$50 billion dollars. Today it forecast a 35% fall in half-year profit, sending its shares plunging by more than 9%.</p>
<p>The disastrous Masters foray is partly to blame. Conceived in oligopolitical hubris, Masters has been an unmitigated disaster for Woolworths shareholders. They were right to expect far better from the company’s exceedingly well-remunerated board and senior executives. The fact that Masters has ended quite a few careers is cold comfort for shareholders who have lost hard earned savings and superannuation.</p>
<p>Today’s results open a new chapter of woe. Once, Masters was seen as an unfortunate sideshow, able to be separated from the Goliathan strength of Woolies’ grocery cash machine. Today, the illusory nature of that misapprehension has emerged – with sales in decline year-on-year for like stores, and a flagged collapse of earnings by up to a third and, most tellingly, no end in sight.</p>
<p>While the problems of the last 18 months at Woolworths have often been ascribed to the Masters debacle, analysts have long been worried about the main game in groceries. Aldi, the privately-held German multinational, has been playing a cautious and patient long game.</p>
<p>Aldi’s “value proposition” to consumers is starkly different to both Woolworths and Coles, and it’s clear Australians have warmed to what Aldi has to offer – a narrow range of good quality products at prices equivalent to the majors’ “specials”. The narrow range and small format stores have the additional benefit of quick and easy shopping for busy consumers. Woolworths has been losing market share quickly.</p>
<p>Its response has so far been too little and too late. Woolworths has tried to “shoehorn” an Aldi equivalent into the lower shelves of its large format stores. It suggests to consumers that they can get a basket of goods similar to Aldi’s at the same price within their stores if they look hard enough. In this regard – to paraphrase the late, great Z.Z. Hill - what Woolies are selling, Australians ain’t buying.</p>
<p>The limited success of this “Aldification” of Woolworths stores has, however, done damage to Woolworths' core business of groceries. Whenever consumers choose the low cost goods within Woolworths, it is at the expense of the higher margin goods they also have for sale. This is evidenced by the steep decline in margins reported today – with sales in slight decline (2.5%) and projected earnings in free fall (28 to 35%). Woolworths is learning the hard way that while revenues are easy to lose, the same can’t be said for the fixed costs involved in running a national retailer.</p>
<p>In the background, again, lies Masters. Its disastrous drain on revenues has meant Woolworths has had little to invest in new stores elsewhere. While Woolworths has opened six new stores during the quarter, Aldi has flagged the opening of up to 80 new stores during 2016, on top of the 80 it opened this year. Its expansion is uncannily like a German train timetable and its geographical spread means most of these new stores will not cannibalise existing sales – something Woolworths can rarely achieve.</p>
<p><em><span style="line-height: 1.3em;">John Rice is p</span><span style="line-height: 1.3em;">rofessor of management, University of New England and can be contacted <a href="https://theconversation.com/profiles/john-rice-93120" target="_blank">here</a>. </span><span style="line-height: 1.3em;">Nigel Martin is l</span><span style="line-height: 1.3em;">ecturer, College of Business and Economics, Australian National University and can be contacted <a href="https://theconversation.com/profiles/nigel-martin-117971" target="_blank">here</a>.</span></em></p>
<p><em><span style="line-height: 1.3em;">Both are authors for The Conversation.</span></em></p>
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jchancellor-FAypfDUnLy

The ‘Aldification’ of Woolworths is destroying its value

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<p>Savills have advised clients on what they see as the <span style="line-height: 1.3em;">four advantages of </span>utilising<span style="line-height: 1.3em;"> SMSF for direct commercial property investment, in preference to other asset classes.</span></p>
<ol>
<li><span style="line-height: 1.3em;">Commercial property is one of the few assets that can be bought by an SMSF from its members. Your SMSF can potentially buy your own business premises and then you can pay rent to your SMSF. <br><br>A residential property, on the other hand, cannot be lived in by a fund member or any fund members’ related parties, nor can it be rented by a fund member of any fund members’ related parties. <br><br></span></li>
<li>
<span style="line-height: 1.3em;">The </span><span style="line-height: 1.3em;">MoneySmart</span><span style="line-height: 1.3em;"> website details the strict rules against using borrowed funds to make improvements to residential property that forms an asset in your SMSF portfolio, so don’t even think about buying a renovators’ delight. This can severely limit potential capital gains as you cannot renovate it to increase its value. <br><br>In contrast, an investment such as a bulk storage unit or warehouse has very low capital expenditure requirements.<br><br></span>
</li>
<li><span style="line-height: 1.3em;">Commercial leases are typically for a longer period than residential leases – usually around five years with a further option for another five years with incremental rental increases built into the lease. <br><br>If you choose the right property and tenants with stable businesses which are unlikely to be adversely affected by an economic downturn you won’t have to deal with a regular turnover of tenants and can rely on a steady rental return. <br><br></span></li>
<li><span style="line-height: 1.3em;">Many industrial properties are purely functional in design and construction, so there is less concern about tenants maintaining them or investors having to pay for costly renovations, which is often the case with residential property investments. <br><br>That said, it’s important to ensure any essential, expensive upgrades, such as those required to meet new fire safety or health and safety standards, have already been carried out before investing in a commercial premise.</span></li>
</ol>
<p><span>Visit the </span><span><a href="https://www.asic.gov.au/" target="_blank" title="Australian Securities and Investments Commission ASIC">Australian Securities and Investments Commission (ASIC)</a></span><span> website to familiarise yourself thoroughly with all the rules and regulations surrounding SMSFs and property investment.</span></p>
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Four reasons why commercial and industrial property suits SMSFs: Savills

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<p><span>So why choose commercial property over residential?</span></p>
<p><span>Obviously this is the question every residential investor asks… whenever they are considering the transition across to commercial property.</span></p>
<p><span>However, you will quickly discover the reasons are rather compelling.</span></p>
<p><span>Reason #1: Your tenants stay for longer</span></p>
<p><span>For the most part, you find residential tenancies will be on a month-by-month basis… maybe 6 months, perhaps for a year if you’re lucky.</span></p>
<p><span>Whereas commercial leases will tend to range between 3 and 5 years - and it can often be for longer. That means you have fewer tenancy changes, and a far more predictable income stream.</span></p>
<p><span>Reason #2: You have greater control</span></p>
<p><span>When residential tenants wish to leave half-way through a lease, they simply need to find a suitable substitute tenant. And then, they will transfer the lease across to that person.</span></p>
<p><span>From there on, this new tenant becomes responsible for the rental, over the remainder of the lease term.</span></p>
<p><span>Whereas commercial tenants are running a business from your property. And whenever they sell their business, they also require your approval to “assign” the lease.</span></p>
<p><span>However, here’s the real difference: If the new commercial tenant defaults in paying the rental, you also have recourse to the previous tenant as well - because commercial leases are business contracts, enforceable by law.</span></p>
<p><span>Reason #3: You no longer need to pay the outgoings</span></p>
<p><span>Typically, residential properties will provide you with a 5% gross rental return.</span></p>
<p><span>From this, you need to pay the rates &amp; taxes, insurance, maintenance and so on — leaving you with about a 2.5% to 3% NET return, at the end of the year.</span></p>
<p><span>Depending upon what (and where) they are… commercial properties will generate a 5% to 9% NET rental return, each year.</span></p>
<p><span>And that’s because commercial tenants are also required to pay the various building outgoings <em>on top of their rental</em> - making this a true NET rental return for you.</span></p>
<p><span>Reason #4: Commercial tenants maintain your property</span></p>
<p><span>As you know, if the toilet stops working in an apartment … the tenant asks you to send around a plumber. Whereas commercial tenants quickly attend to (and pay to fix) the problem themselves - so as not to disrupt their business.</span><span style="line-height: 1.3em;"> </span></p>
<p><span>Furthermore, the overall appearance of the property becomes a reflection on them. As such, your property is maintained in top condition … at their expense.</span></p>
<p><span>Therefore, whether the lease requires it or not … most commercial tenants will regularly repair and repaint the property, in order to maintain a good corporate image.</span></p>
<p><span>Reason #5: Greater regularity with rental payments</span></p>
<p><span>Most residential properties are rented by individuals. Therefore, the rent is often paid in cash, by personal cheque or by direct transfer. And this can often vary in its timing.</span></p>
<p><span>Because they are running a business, commercial tenants consider rent as simply another regular expense each month.</span></p>
<p><span>And generally, this gets set up as an automatic Periodic payment - and can be specified as such, within the lease.</span></p>
<p><span>Bottom Line: In essence, you find yourself having to deal with the vagaries of individual people… as a residential investor.</span></p>
<p><span>However, when you become a commercial investor… you start to enjoy a more predictable long-term relationship with your tenants - based upon a proper business footing.</span></p>
<p><span>Doesn’t that sound like a far better arrangement - particularly when you can purchase a small office for the same price as a two-bedroom apartment?</span></p>
<p><strong><em>Chris Lang </em></strong><em>is an advisor to commercial property investors, sell-out author and regular speaker on how to invest in commercial property. You can contact Chris <a href="https://commercialpropertymadeeasy.com" target="_blank">here</a>.</em></p>
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chrislang-EQKojcgJPV

Why choose commercial property over residential? Chris Lang

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<div>The ABS released its Lending Finance figures for August 2015 this morning.</div>
<div> </div>
<div>August was a weaker month for commercial lending, with the trend estimate declining by -2.1% in the month to $44.1 billion, having peaked at more than $48 billion back in April.<br><br>The trend certainly appears to be softening in sympathy with weak capex intentions surveys and macroprudential measures to trim back property investment loans - but then, that's been said before through this cycle, so time will tell. </div>
<div> </div>
<div>On the other hand, home lending to owner-occupiers is now trendng up sharply, with the seasonally adjusted result showing a +6.1% leap in August, and the trend estimate bolting +18% higher over the year. </div>
<div> </div>
<div>Significantly, AMP announced today that it would chop a variable rate home loan package available to owner-occupiers to a highly competitive rate of just 3.99%.</div>
<div> </div>
<div>It seems likely that the major banks will be targeting this sector hard in the months ahead.<br><br>Total lending finance has also trended down a little from an April peak.</div>
<div> </div>
<div><a href="/images/2015/10/13/A1.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2015/10/13/A1.jpg" alt=""></div>
<div> </div>
<div><span>Charted below is what at face value is happening to owner-occupier home loans at the state level, which is to say now apparently burning up in the most populous states.</span></div>
<div><span> </span></div>
<div><a href="/images/2015/10/13/OwnerOccupiersRolling12m.jpg" target="_blank"><span>Click to enlarge</span></a></div>
<div><span><img src="/images/2015/10/13/OwnerOccupiersRolling12m.jpg" alt=""></span></div>
<div> </div>
<div> </div>
<div>
<div>In obliquely related news, the latest credit card figures from the Reserve Bank showed that Aussies are clearing credit balances more comfortably than before, with balances down over the year and more of us opting to pay off balances by the due date.</div>
<br><strong><span style="text-decoration: underline;">Switcheroo</span></strong><br><div> </div>
<div>For the remainder of 2015, the housing market story will largely be a tale of whether banks and borrowers can find a way to shoehorn owner-occupier lending higher in order to offset any pending declines in investor loans.</div>
<div> </div>
<div>In August the answer was seemingly at an emphatic "yes" with investor loans essentially flat at $13.6 billion but owner-occupier commitments ripping more than <a href="https://petewargent.blogspot.co.uk/2015/10/housing-finance-shock" target="_blank">+6 per cent higher</a> to $20.8 billion. </div>
<div> </div>
<div>In this regard, the AMP decision to cut its variable rate to below 4 per cent effective from today appears to be a clear statement of intent.</div>
<div> </div>
<div>That said, the August figures may yet prove be <a href="https://petewargent.blogspot.co.uk/2015/10/housing-finance-shock" target="_blank">bogus</a> to some extent, and another month or two of data will shed more light. </div>
<div> </div>
<div>In the words of one eminent Chief Economist "we can conclude that the figures have suddenly become a lot murkier", while Westpac instead opted for a more canine theme in describing the latest data as "a dog's breakfast".</div>
<div> </div>
<div>Overall it seems that the macroprudential story has some way to run yet before the waters are de-murkified (or the dog's morning meal is digested). </div>
<br><span>I looked at this in more detail in relation to last week's Housing Finance release </span><a href="https://petewargent.blogspot.co.uk/2015/10/housing-finance-shock" target="_blank">here</a><span>.</span><br><br><div><strong><span style="text-decoration: underline;">Investor loans cooling...</span></strong></div>
<div> </div>
<div>Of course the flip side to the new-found strength in the homebuyer space is that property investment loans should now be cooling in response to APRA's calming macroprudential measures.</div>
<div> </div>
<div>On a rolling annual basis New South Wales originated investor loans climbed to a new high of $67.6 billion, but there have now been two consective months of declines in original terms from the May 2015 monthly peak of $6.6 billion.</div>
<div> </div>
<div>Although investment loans remained at a high level in Victoria and Queensland, there has been a general cooling of this sector across recent months.</div>
<div> </div>
<div><a href="/images/2015/10/13/LF1.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2015/10/13/LF1.jpg" alt=""></div>
<div> </div>
<div>
<span>Since the investment loans data is not seasonally adjusted I also look at it on a 12mMA basis, and we can see that while the trend in Queensland has risen to its highest level since April 2008, the trend is now falling in Western Australia, South Australia and Tasmania.</span><br><br><span>In the Northern Territory the trend in investment loans seems to be dropping off a cliff so there is likely to be some fallout for Darwin.</span><br><br><span>More on all of these figures and trends to follow tomorrow.</span><br><br><span>The detailed monthly investor loans figures for New South Wales show loans tracking at $5.53 billion in August, down from the all-time record high of $6.62 billion in June.</span>
</div>
<div><span> </span></div>
<div><a href="/images/2015/10/13/LF3.jpg" target="_blank"><span>Click to enlarge</span></a></div>
<div><span> </span></div>
</div>
<div><span><img src="/images/2015/10/13/LF3.jpg" alt=""></span></div>
<div> </div>
<div> </div>
<div><span>Looking at total lending for housing in New South Wales, the total housing market finance for August surpassed $13 billion for the third time, however it could not quite match the record levels seen in June.</span></div>
<div><span> </span></div>
<div><a href="/images/2015/10/13/LF2.jpg" target="_blank"><span>Click to enlarge</span></a></div>
<div><span> </span></div>
<div><span><img src="/images/2015/10/13/LF2.jpg" alt=""></span></div>
<div> </div>
<div> </div>
<div>
<div class="separator"> </div>
<div class="separator">The most important release of the week will be the Labour Force data for September on Thursday morning. </div>
<div class="separator">
<br>Expecting to see a flat result for the month, both for total employment and the unemployment rate.</div>
<div class="separator"> </div>
<div class="separator">
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
</div>
</div>
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pwargent-M4siyDbqQY

The housing market switcheroo: Pete Wargent

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<p>While the anticipated trend might be a post-pandemic pivot away from office to residential projects, one Melbourne developer is sticking to their original intentions.</p>

<p>Developer DeGroup will embark on their new $70 million office tower in Melbourne’s CBD despite concerns over rising vacancy rates.</p>

<p>Founder Colin DeLutis said the group was more than confident that the new building would find a ready leasing market.</p>

<p>Located at 263 William Street, in the heart of Melbourne’s legal precinct, the project is set to rise 75 metres above the Metropolitan Hotel which will be retained with a suite of restoration works.</p>

<p>"With nothing new and modern having been built in the legal precinct for over 20 years, we are quite bullish about the market and very confident about the building’s leasing potential”, DeLutis said.</p>

<p>The company’s confidence diverges from commentary by property experts who have expected a lessening of demand for commercial developments in the Melbourne CBD.</p>

<p>“We’re going to see CBD office buildings converted into residential,” Kernel Property’s Steve Urwin said in July.</p>

<p>This has been supported by recent national office statistics for Q3, released by JLL.  </p>

<p>“The extended lockdown in Melbourne has negatively impacted the leasing market with the availability of backfill space and sublease space contributing to the uplift in vacancy”, said JLL’s head of leasing Tim O’Connor.</p>

<p>According to JLL’s insights, the Melbourne CBD recorded -70,100 sqm of net absorption over the quarter and vacancy increased to 11.3 per cent in 3Q20. </p>

<p>The presumed push away from offices has yet to influence some Melbourne’s commercial developers who are confident that businesses and their clients want COVID safe, hygienic spaces.</p>

<p>The 20-storey, 7,013sqm building, offers 3,799sqm of office space over 17 levels and features an 822sqm multi-level restaurant and bar.</p>

<p>The self-contained office floors will feature kitchenettes, shower facilities, natural light from all sides and views of Flagstaff Gardens and the surrounding CBD.</p>

<p>Crema Constructions have been appointed as builders of the WMK Architecture designed building.</p>

<p>The tower is due for completion in 2022.</p>
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While the anticipated trend might be a post-pandemic pivot away from office to residential projects, one Melbourne developer is sticking to their original intentions

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DeGroup to go ahead with $70m office tower in Melbourne CBD

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<p>A freehold property which in Surrey Hills in Melbourne's east is being marketed towards investors and owner-occupiers.</p>
<p>It has been the home to a GP for over 40 years. The current rental is $50,000 per annum on a monthly term.</p>
<p>The 180 sqm, two storey property at <a href="https://www.realcommercial.com.au/property-retail-vic-surrey+hills-502774046" target="_blank">922 Riversdale Road</a> last traded for $60,000 in 1980.</p>
<p>It sits on a 252 sqm site zoned commercial 1.</p>
<p>Teksa Carson agents Fergus Evans and Michael Ludski are marketing the property for a May 23 auction.</p>
<p>Evans says the property is being offered an excellent investment or owner occupier opportunity in a tightly held precinct featuring a wide range of commercial office buildings, retail boutiques and restaurants.</p>
<p class="p1">"The property would suit a range of buyers and uses under the Commercial 1 zoning, including prior use rights, with excellent potential for capital growth in a prime location in one of Melbourne’s most popular and tightly held retail precinct."</p>
<p class="p1">"The property benefits from ample amenity in the immediate vicinity and outstanding educational institutions nearby, as well as access to major arterial routes including Riversdale Road and Warrigal Road,’’ Mr Evans said.</p>
<p class="p1"><span class="s1">Ludski said he expected a high level of enquiry given recent strong interest in similar properties in the inner east.</span></p>
<p class="p1"><span class="s1">"Well located properties in the inner east are very much in demand from small investors and owner-occupiers looking for strong market fundamentals,’’ Mr Ludski said.</span></p>
<p class="p1"><span class="s1">He said the property’s close proximity to the CBD, freeways and public transport were additional attributes that would prove advantageous to any purchaser</span><span class="s2">.</span></p>
<p class="p1"><span class="s1"> </span></p>
<p class="p2"> </p>
<p class="p3"><span class="s1"><strong> </strong></span></p>
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