Commercial Property

Commercial Property Hub is a user-friendly digital platform that streamlines the process of finding suitable commercial properties in the City of Yarra and the City of Port Phillip.

&lt;iframe width="560" height="315" src="https://www.youtube.com/embed/D43Ldrb12rs" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen&gt;&lt;/iframe&gt;

It offers an extensive database of commercial properties details, including details about zoning, overlays, and demographic information.

With this platform, businesses and individuals can identify properties that align with their specific needs and requirements.

The platform also provides links to council business concierge programs, which offer additional support to businesses to ensure their smooth operations.

Commercial Property Hub is a one-stop solution for businesses and individuals looking for hassle-free access to comprehensive information on commercial properties in the City of Yarra and the City of Port Phillip.

Commercial Property Hub is a user-friendly digital platform that streamlines the process of finding suitable commercial properties in the City of Yarra and the City of Port Phillip. 

Urban Editorial

Commerical Property Lookup Hub | City of Yarra of Port Phillip

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Nine Entertainment's digital and print real estate media business Domain Holdings is set acquire the Commercialview.com.au website.

For starters Domain will spend $2 million in cash to secure the commercial property digital listings platform, which had most of its footprint in Melbourne and Sydney.

CommercialVIEW.com.au is a stand-alone commercial real estate advertising portal that is industry owned, directed by Ben Cooper, Stephen Gorman, Malcolm Gunning and its CEO Daniel Bignold. Its issued capital is given as $3.8 million, with nine million ordinary shares on issue and 310,000 redeemable preference shares.

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During the past year the board exercised its power to change the option terms with the exercise price of the options reduced from $0.50 to $0.00.
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It was established in 2012 under the stewardship of Petra Sprekos and Enzo Raimondo of the REIV.

In 2016 Bignold made a rare public comment on the state of the website.

Bignold said the dominant players in the market had been able to press prices higher, putting pressure on commercial property agents. 

"We have a price point that’s very fair and reasonable, and is less than our competitors," he noted. 

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Domain Holdings Australia Limited announced its commercial real estate business, Commercial Real Estate entered into a three stage agreement with shareholders of Commercialview.com.au Limited to acquire 100% of the issued share capital in CommercialView.

The acquisition will occur through a subsidiary of Domain, Commercial Real Estate Media Pty Limited (“CREM”), which is currently approximately 70% owned by Domain and 30% owned by members of the commercial real estate industry.

The consideration for the proposed transaction is anywhere between $4.2 million and $17.2 million, contingent on targets relating to the future financial performance of the CREM and CommercialView businesses. 

The on-target consideration is $10.2 million, which is equivalent to four times the projected increase in EBITDA from the transaction for calendar year 2020, including synergies.

The maximum consideration for the acquisition is $17.2 million of which a maximum of $2 million is payable in cash. The remainder is payable in newly issued shares in CREM.

Domain Group CEO Jason Pellegrino said there had been unanimous support for the transaction from CommercialView shareholders.

The commercial property website recently reported another loss in its annual results which gave its revenues as $1.6 million.

It was segmented into $440,000 subscription revenue, $150,000 banner advertising and over $1 million in depth revenue.

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The 2018 financial year loss of the company after providing for income tax amounted to $8,500 compared to its $428,000 loss in the prior year.

Its directors, who noted it was a high demand/low supply commercial property market, slashed marketing expenses from $386,000 to $255,000. 

"For a portal, this is a difficult market to extract revenue as not only stock levels are low, but when stock is listed it generally move fast and doesn’t require large ongoing advertising budgets. 

"Total new listings that hit the CVIEW portal in FY18 compared to FY17 were down 21 percent and listings for sale were down 29 percent yoy. 

"This creates a large void for listing upgrade opportunities particularly investment stock which generally attract a larger advertising budget."

The revenue focus for the year was seeking upgrade opportunities for remaining sales stock and also to leverage the larger proportion of leasing stock in the market.

The business has had a "clear strategy" of tightening up on expenses without negatively impacting the operations, which resulted in a 22 percent reduction in expenses and $150,000 positive full year EBITDA and an $88,000 increase in cash balances for the year. Its assets included $474,000 in cash and $193,000 in trade receivables.

Its deferred tax assets sit at $700,000 plus.
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Completion of the proposed transaction is targeted to occur on 21 December 2018.

The consideration is payable in three tranches, partially contingent on targets relating to the future financial performance of the CREM and CommercialView businesses, as follows:

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	a payment of $4.2 million to be paid at completion as a combination of cash and CREM shares, amounting to approximately a 3.7% equity interest in CREM;
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	a second payment payable in early 2020, in the range of $0 to $5 million to be paid as a combination of cash and CREM shares; and
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	a third payment in early 2021, in the range of $0 to approximately $8 million payable in CREM shares.
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jchancellor-FAypfDUnLy

Commercialview.com.au sold by estate agents to Domain

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GUEST OBSERVER
The Deloitte Access Economics “Investment Monitor” provides a detailed snapshot of Australia’s investment project pipeline. The database contains details on 1,073 projects valued at $20mn or more, as at June 2016. Here we provide an update of the key results.
Note, the full value of a project is included in the investment pipeline until the project is either completed or deleted. This differs from official estimates of the existing “work pipeline”, which is the value of work yet to be done on a project currently under construction.
The Investment Monitor estimates the total project pipeline to be $822bn at present. That is a $42bn increase on March, reversing declines over the second half of 2015, to be $2bn higher than a year ago.
<a href="/images/2016/08/01/Screen%20Shot%202016-08-01%20at%201.24.38%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/08/01/Screen%20Shot%202016-08-01%20at%201.24.38%20PM.png" alt="">
Significantly, the value of definite projects (those either under construction or committed) rose by $49bn to $431bn, to be $11bn above a year ago but $37bn below the peak of three years earlier.
Potential projects (either under consideration or possible) are valued at $391bn, some $10bn lower than a year ago.
As we have highlighted previously, the project flow is changing course on a stream of new public transport initiatives. That was the clear theme in the latest update.
In June, $39bn of the $49bn increase in total definite projects was explained by public transport initiatives. Following the round of annual state budgets, there are now 29 public transport projects at the committed stage, with a combined value of $44bn, up from 19 with a value of $5bn in March. The transport &amp; storage investment pipeline in total is $231bn, dominated by the public sector, $190bn.
<a href="/images/2016/08/01/Screen%20Shot%202016-08-01%20at%201.26.09%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/08/01/Screen%20Shot%202016-08-01%20at%201.26.09%20PM.png" alt="">
The oil and gas sector accounted for the remaining $10bn increase in definite projects in June, most of which was a $7.6bn cost blow-out on the Inpex Ichthys gas field project to $45bn. Phase 2 of the Greater Western Flank project in the Pilbra WA, valued at $2bn, entered the database in June, at the committed stage, with a 2016 H2 start date.
The mining project pipeline, totalling $382bn, of which $202nd is at the definite stage, will thin considerably when the 5 remaining mega gas projects, with a combined value of $172bn, are completed over 2016 and 2017, with potential slippage into 2018.
The non-mining investment pipeline (excluding transport and ex the $44bn NBN), is $165bn, unchanged over the past two years. Of that, $80bn are definite projects, up $2.4bn on mid-2015. Notably, the investment pipeline of accommodation projects, with the low AUD boosting tourism, is valued at $23bn and while that is unchanged on a year ago there has been some transition to the definite stage, up $3bn over the year to be $5.6bn.
<a href="/images/2016/08/01/Screen%20Shot%202016-08-01%20at%201.27.11%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/08/01/Screen%20Shot%202016-08-01%20at%201.27.11%20PM.png" alt="">
Mining projects
The mining sector project pipeline is valued at $382bn currently, a $22bn partial rebound on March but still $22bn lower than a year earlier and well below the $478bn peak at end 2012. (Note, mining-related projects can be included in other sectors, e.g. transport &amp; storage.)
The 5 mega gas projects under construction are together worth $172bn. By LNG projects: Gorgon, $61bn, which moved to the start-up phase in the first half of 2016, is to be fully completed by late 2016; Origin’s Australia Pacific LNG $25bn project, Qld, second production train is expected to start production in Q4 2016; Wheatstone, $29bn LNG project in the Pilbara WA, start- up has been delayed to mid-2017; Prelude, $12bn floating LNG platform, Kimberley WA, 2017 start-up potentially delayed to 2018; and Ichthys $45bn project, NT, second half of 2017.
As to oil and gas projects currently under construction, while the combined full project value is $179bn, the pipeline of work outstanding is $35bn, as estimated by the ABS (for March).
Excluding the 5 mega gas projects, the mining project pipeline is: $210bn in total, of which $30bn is definite, $94bn is under consideration and $86bn is possible. The commodity price slump over recent years raises doubts as to how many of these potential projects will proceed near-term.
<a href="/images/2016/08/01/Screen%20Shot%202016-08-01%20at%201.28.19%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/08/01/Screen%20Shot%202016-08-01%20at%201.28.19%20PM.png" alt="">
Transport &amp; storage, public projects
Transport projects in the public sector was a key mover in the June quarter, following the recent round of annual state budgets. Notably, the state government’s have found the capacity to lift public investment, a much needed development.
Transport &amp; storage projects in total are valued at $231bn in June, dominated by the public sector, at $190bn. Looking back over recent years, the public transport investment pipeline initially rebounded in 2013; moved higher in 2014; marked time in 2015; and jumped in June 2016, up $24bn on three months ago. By stage, the public transport pipeline is: $51bn under construction (unchanged from 3 months ago); $44bn committed (+$39bn); $62bn under consideration (–$2bn); and $33bn possible (–$12.5bn).
<a href="/images/2016/08/01/Screen%20Shot%202016-08-01%20at%201.29.57%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/08/01/Screen%20Shot%202016-08-01%20at%201.29.57%20PM.png" alt="">
Relative to a year ago, the definite projects pipeline is up $44bn, with gains by state of: NSW, +$17bn to $51bn; Victoria, +$15bn to $21bn; Qld, +$7bn to $13bn; WA, +$2bn to $6bn; and SA, +$2.5bn to $2.7bn. Of note, advancing to the definite stage were: in NSW: Sydney Metro stage 2, $12bn; Pacific Highway upgrade Woolgoolga to Ballina, $4.4bn; in Victoria: CityLink upgrade, $1.3bn; Melbourne Metro, $11bn; Dandenong Rail Corridor, $1.6bn; in Qld: new generation rollingstock &amp; Wulkuraka maintenance centre, $4.4bn; Toowoomba second range crossing, $1.6bn; in WA: Forrestfield Airport Rail Link, $2bn; NorthLink WA, $1.1bn; and in SA: five road projects, with a combined value of $2.5bn.
<a href="/images/2016/08/01/Screen%20Shot%202016-08-01%20at%201.31.03%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/08/01/Screen%20Shot%202016-08-01%20at%201.31.03%20PM.png" alt="">
Public transport projects under consideration are: in NSW, $23bn, including a second tunnel under Sydney harbour, $10.4bn + $4.5bn; Western Sydney light rail, $2.9bn; and Western Sydney airport, $2.5bn; in Victoria, $13bn, including $5.5bn North-Esat (missing) link; and $5.5bn, Western Distributor; in Qld, $9bn, incl’ Brisbane underground train/bus terminal, $5bn; in WA, $5bn, including Perth Freight Link, $1.9bn and Perth light rail, $1.9bn; and there is also the $10bn Melbourne to Brisbane inland rail link.
<a href="/images/2016/08/01/Screen%20Shot%202016-08-01%20at%201.31.10%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/08/01/Screen%20Shot%202016-08-01%20at%201.31.10%20PM.png" alt="">
 Andrew Hanlan is senior economist for Westpac and can be contacted <a href="https://www.westpac.com.au" target="_blank">here</a>. 
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Public transport initiatives lift Australia's investment project pipeline

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SPONSORED POST
In the past 18 months, there has been a continual compression of capitalisation rates, or cap rates, across Australia’s commercial property markets.
So what exactly does this tell us about where the market is now and where we are headed in the next couple of years?
Let’s start with what a cap rate is. It is the ratio of net operating income of a property to its market value – the percentage return an investor would get if they purchased the property for cash.
We spoke with Dr David Higgins, Associate Professor, Property Investment at RMIT University, and asked him what drives cap compression.
“To understand the dynamics you have to think of the influences in three parts. First, there is the demand by tenants for a certain property type and location, a factor I call space demand. Then we have to consider the supply of property available for lease and how much new stock is coming on to the market,” he says.
“Finally, and most importantly, we have to factor in the dynamics of the investment and debt markets, because property’s return on investment must be seen relative to other investment avenues, particularly cash and term deposits.”
Cap rates can be a useful guide to market expectations of what will happen to values in the future but they can be bumped around by changes in investor sentiment and alternate markets.
“A-REITS returned to the market after the shock of the GFC,” Higgins told us. “And when you look at institutions like Stockland and Dexus, you see a new breed of management. They used to be drawn to idea that big is beautiful, but what I’m seeing from the new group is that they are more selective and have tightened their risk management.
“Vacancy rates are creeping up but this is not reflected in market yields.”
The reason why is primarily because, with the official cash rate at 2.5%, investors can invest in property and borrow at a rate close to inflation to buy assets with a history of stability.
James Quigley, National Director of Capital Markets at Colliers International, told us that it is this weight of money returning to market which is driving values.
“In the 2007 peak before the GFC hit, a quality asset in the Sydney market would be yielding say at 7% but the cost of debt was around 8%. When you look at the equation now, a well-rated investor’s cost of debt could be as low as 4.5% – 5%, which means their asset is cash flow positive from day one,” Quigley says.
“What’s been driving compression is capital looking for yield. We’re seeing demand from a range of onshore investors, syndicates filled with ‘mum and dad’ investors, super funds and A-REITS.
“But we also see a lot of offshore money as well, particularly global sovereign wealth funds and private investors from Asia.
“The office lease market is still soft, with incentives up for assets with shorter WALEs (weighted average lease expiries) but there is good investor demand for quality modern offices and industrial assets like distribution centres with long-term mandates to single leaseholders.
“The change we’ve seen in recent times is offshore investors looking at office buildings with shorter WALEs with a view to converting them to residential.”
And what is likely if interest rates, as predicted by some analysts, start to rise over the next two years?
“Obviously if we see upwards movement that holds the potential to change the current equation, but right at the moment, it is the sheer weight of money which is driving the market,” Quigley says.
For more information, <a href="https://www.realcommercial.com.au" target="_blank">click here</a>.
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Cap rate compression & what it tells us about the market: realcommercial.com.au

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GUEST OBSERVER
With low interest rates, combined with strong house prices and tighter residential investor lending conditions, lenders are urging investors to consider adding a commercial property to their real estate portfolios.
If you’re new to commercial real estate, the good news is that you can still rent out the property just like a house or apartment. And better still, you receive a rental income in return. In fact, as a general rule of thumb, the rental yields for commercial property investments may vary between 6 percent and 12 percent.
This wide variation can be attributed to whether it’s a retail, industrial or office space, the build quality and location of the asset, its environmental rating and so on.
Other important differences with residential real estate include the fact the tenant of a commercial property is called a “lessee”<a href="https://www.investopedia.com/terms/l/lessee.asp">,</a> and the leases generally run for longer periods of time – usually several years. The trouble is that when a commercial lessee decides to move on, finding a replacement business to take up the lease can be a little more time-consuming than finding a residential tenant.
Also, Goods and Services Tax (GST) applies to a commercial property. If you buy a commercial premises, such as a shop or factory, you may be eligible to claim a credit for the GST included in the purchase price.
You may also be able to claim GST on other expenses that relate to buying the property – such as the GST included in solicitors’ fees and ongoing running expenses, according to Australian Taxation Office. So be sure to keep your records and paperwork up to date.
In addition, any commercial properties used in the running of a business are subject to capital gains tax (CGT). You’re also generally liable for GST on the sale price and can claim GST credits on related purchases.
Angus Raine is executive chairman, <a href="https://www.raineandhorne.com.au/" target="_blank">Raine &amp; Horne</a>.
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What is involved in investing in a commercial property? Angus Raine

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GUEST OBSERVER
Australian car manufacturers are closing. Ford is closing in October this year. Toyota and Holden are to quit manufacturing in Australia by the end of 2017.
That means that from 2017, Australia will not have a local car manufacturing industry. This will especially impact on companies that make parts for new cars.
One aspect that has not been discussed among the many forthcoming hardships, is the impact on industrial property owners. The suburbs of Melbourne will be hard hit, especially the Northern Suburbs.
Opinions vary as to the number of businesses in the automotive component manufacturing industry but all agree that it is a large number. Many of which are located in Melbourne’s outer suburbs. Administrators appointed to one component manufacturer claims there are 150 firms nationally while Ibis Research says there are 882 businesses. Government committees have relied on automotive aftermarket association membership of 260 as their number.
Many component suppliers’ premises are setup for manufacturing and have limited alternative uses. While there is an ongoing demand for warehouse and distribution industrial properties, these component supplier premises are not considered as they usually lack the necessary high ceiling and high clearance entrance required for storage stacking and large vehicle access.
<h1 style="text-align: left;" align="center">Figure 1. Declining Industrial while Retail and Office do strong </h1>
<a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%201.12.09%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%201.12.09%20PM.png" alt="">
The effect on industrial property will happen sooner than we think. In fact, it’s happening now.
The Commercial Property Guide Asking Price Index (API) shows a steady decline in the rent that real estate agents are seeking for their clients’ industrial properties. This contrasts with a healthy increase over recent times for office and retail commercial space.
The industrial property rental asking price has been in a decline since November 2015 (see figure 1.). In May 2016 the asking price for industrial property rents have decreased 1.0 percent in the past three months. In the last two months (June and July) industrial rents have found a new lower level. One area that has been particularly hard hit is the Inner Northern suburbs of Melbourne where demand for logistics and warehouse properties does not appear to have offset the effect of factory rents decreases. Table 1. Shows the last six month changes.
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Feb
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Mar
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Apr
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May
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June
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July
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-3.08
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-1.23
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-3.23
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-3.08
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-3.26
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-1.78
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Table 1. Change over the previous 3 months for Inner Northern Melbourne Industrial Property
With domestic vehicle manufacturing to cease by 2017, the Victorian Government has launched a funding program “Towards Future Industries: Victoria’s Automotive Transition Plan”, to assist businesses, employees and communities to capitalise on opportunities and provide support to those affected.
One group not eligible for direct assistance are factory owners of premises where component manufacture will stop.
The Commercial Property Guide API is starting to tell the story of these parts makers. There is considerable lead-time required to transition out of car parts to a new opportunity. As well as the much discussed unemployment and economic impact, the unintended consequences on commercial property owners is just beginning to be felt.
Simon Rose is chief executive officer, Commercial Property Guide and can be contacted <a href="https://www.commercialpropertyguide.com.au" target="_blank">here</a>.
 
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Real estate early-warning radar for end of car manufacturing

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SPONSORED POST
It comes as no surprise that Australians are spending more time online than ever before. But as technology becomes even more entrenched in everyday life, how and where are we spending that time?
Recent data shows our web habits are changing rapidly as our devices become faster and smarter, with print readerships now in significant decline and more consumers looking to digital as their first source of news and information. And nowhere is this more apparent than in the commercial property space.
Online explosion
Global information firm Nielsen, in its latest Digital Landscape Report, reveals the average Aussie user spent a whopping 72 hours surfing the web in January. That's a whole three days online per person, with an astounding 19.7 million Australians actively surfing online.
“Consumers are increasingly connected online, both in and out of the home,' says Nielsen consumer insights associate director Kate Kopczynski. “Whether they are grocery shopping, watching sport, studying, commuting to work or connecting with friends — these are no longer purely offline experiences.”
Commercial property at the forefront
Nowhere is the online medium's growing dominance better illustrated than on realcommercial.com.au, which has recorded staggering year-on-year growth in the number of users on phones and tablets. People used a phone 997,000 times to access listings on realcommercial.com.au in March this year – a 144 percent year-on-year increase – while more than 218,000 users accessed realcommercial.com.au on a tablet – a 56 percent jump on March last year.
Mobile phones now make up 42 percent of realcommercial.com.au visits alone, and this stunning growth is set to gain further pace as print readerships continue to fall away.
The way of the future
The pace of Australia's digital transformation is such that the landscape is now barely recognisable from where it was just a few years ago. Today, the latest advancements in the commercial property space are centered on technology that knows buyers and consumers better than they know themselves.
Gone are days of sifting through hundreds of properties in a newspaper or online – now it's less about consumers finding the right listings and more about the right listings finding consumers.
This type of 'artificial intelligence', new to the commercial property industry, is designed to put buyers' and sellers' eyes on more of the properties they're interested in, and will forever redefine what it means to list a commercial property online. Watch this space for two exciting <a href="https://www.realcommercial.com.au" target="_blank">realcommercial.com.au</a> products set to change the way we market commercial property.
For more information, <a href="https://www.realcommercial.com.au" target="_blank">click here</a>. 
ABOUT REALCOMMERCIAL.COM.AU: realcommercial.com.au is the leading website in Australia for commercial property, attracting an average of 1.7 million visitors a month (Source: Nielsen Online Market Intelligence, Total Traffic, average calculation May-July 2015, includes app traffic from Omniture Site Catalyst as Nielsen doesn’t report on app). It is owned and operated by realestate.com.au Pty Ltd, a subsidiary of ASX-listed REA Group Limited ACN 068 349 066 (ASX:REA).
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What is the way of the future for commercial property?

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GUEST OBSERVER
Market activity in commercial and industrial real estate can be assessed under two types of market interest.
Owner-occupiers are strong at the affordable end of the market as business operators well understand that it is preferable to own rather than rent the properties they use or need for their businesses.
For many business owners it is much more effective to own rather than rent their premises, especially with the prevailing low interest rates.
It is also quite common to see the property purchased at auction held in the name of a superannuation fund where it is leased back to the operating business at often for an attractive return.
The second strong area of interest is from investors with self managed superannuation funds.
For a lot of SMSF investors a commercial property provides a diversification and they are regularly being advised by their accountants or specialist advisers to acquire a commercial investment.
Certainly the return is usually better than a residential investment because a commercial property that is well and securely leased provides a more reliable income stream than almost any other type of property investment.
I always say that in investing in any type of property the purchaser needs to know and understand the key market fundamentals.
This includes factors like market liquidity, add on costs like State Land Tax and the transaction costs of stamp duties, legals, agency or management fees and transaction costs as both a buyer and as a potential seller.
Often my engagement may involve trying to right the wrongs caused by poor leasing advice and structure to rectify a property’s optimum lease structure.
For instance, I am currently appointed by the Melbourne Theosophical Society to manage the proposed sale of their long held historic building at 126-128 Russell Street.
A landmark four level building in part occupied by the Society it has multiple tenancies and is currently generating an annual rental income of around $350,000.
My expectation is that 126-128 Russell Street will be offered to the market before the end of the current financial year and given the shortage of key CBD freeholds on offer it is likely to be keenly bid.
David O’Callaghan is the managing director of O’Callaghan Commercial and can be contacted <a href="https://www.ocallcommercial.com.au" target="_blank">here</a>. 
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Understanding commercial market fundamentals: David O’Callaghan

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GUEST OBSERVER
When it comes to investment in infrastructure, there’s no question that the NSW Government has work to do. Decades of under-investment in critical services has left a gaping hole, but recent State Budgets have at last announced substantial plans and funding for road, motorways and even more importantly, better public transport.
It’s good news for property as well.  
Infrastructure is vital to economic development and prosperity. Because it comprises the essential services that underpin growth, its development contributes substantially to employment, productivity and competitiveness.
It’s also a very good thing for property markets. Infrastructure upgrades usually result in strong demand in local markets, because property investors will pay more for locations with good infrastructure, or with infrastructure developments in the pipeline.  Transport infrastructure, in particular, both rail and road, makes areas more accessible, and therefore more attractive. This in turn pushes rental growth and occupancy levels in local commercial sectors.
At the same time, infrastructure projects are generally targeted at high growth areas, so this can be used by property developers and builders to estimate employment growth. They boost the local economy by creating new jobs and attracting more people to a precinct, which in turn leads to other, indirect benefits, such as increased consumer spending and the social benefits associated with community development.
According to the <a href="https://www.nsw.gov.au/nsw-regional-infrastructure" target="_blank">NSW Government</a> $20 billion is now being spent rebuilding NSW, and funding to some of the more critical projects has been accelerated. These include the Sydney Metro (City and South-west), the Parramatta Light Rail, Regional Road Freight Corridor and the Western Harbour Tunnel. A new underground railway station at the Barangaroo development in Sydney has also been announced.  In Sydney city, Stage 1 of the Sydney Metro is the $8.3 billion Sydney Metro Northwest is set to open in 2019. Stage 2, extending metro rail under Sydney Harbour and through the CBD is expected to be open by 2024.
For investors seeking to identify areas likely to grow more quickly than others, an understanding of where infrastructure development will be focused is key. Because the effect can be dramatic.  
In 2000, Centuria purchased two properties in Waterloo Road and Byfield Street in Macquarie Park, for $24 million. At that time, there was little infrastructure in the area, and public transport links in particular were poor. Centuria took the view that the area would benefit from planned infrastructure developments, including the Chatswood to Epping Rail Link and the expansion of the Macquarie Centre, both of which were completed. The Macquarie Park office precinct is now larger than the North Sydney office precinct, and there has been an ensuing strong demand for space.
In 2016, Centuria sold the properties for $101 million providing investors with a fivefold increase on their investment and an internal rate of return of over 20% - a significant total return given the sixteen-year life of the fund.
Chatswood is another example of a precinct set to benefit from improved infrastructure and transport links. Sydney’s North Shore office market is already a strongly performing market and in our view is set to perform more strongly still in the coming years. Commercial office space is being withdrawn for residential conversion, which is reducing supply while pushing rents up and vacancy rates down. We believe that the Metro currently under construction will continue to drive above trend growth over the longer term.    
In May of this year, we partnered with global investment manager BlackRock to purchase the best office building in Chatswood -  the Zenith office complex for $280 million. Our 50% stake is held in the unlisted Centuria Zenith Fund, and our forecast is for a 7.6 percent income return in the first year, increasing to 7.7 percent in the 2018 financial year. As for total returns over the life of the fund, we are confident that active management of the property by our specialist asset management team, which includes $30 million in capital expenditure to make the property best in class will result in excellent total returns for investors over the longer term.
Regardless of research or experience, there are no sure things in investment, in property or any other asset class. However, there are themes and trends which influence returns over time. The link between infrastructure spend and the performance of property markets is one of these.
Infrastructure provides essential services that drive economic growth, employment and productivity, and property in the areas where infrastructure is well-developed, performs better than property in other areas. Given the NSW Government’s focus on infrastructure investment, investors would do well to look at areas where money is being spent, and consider the long term possibilities and outlook for commercial property there. 
Jason Huljich is chief executive officer of unlisted property funds for Centuria, and can be contacted <a href="https://centuria.com.au" target="_blank">here</a>.
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NSW infrastructure spend boosts commercial property markets 

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GUEST OBSERVER
Whether or not the government removes the ability of self managed super funds (SMSFs) to borrow to purchase property or other investments, the implications for investors are relatively minor.
With rare exceptions, borrowing to purchase assets outside super is far simpler and more tax-effective than borrowing in an SMSF.
Even ignoring the strict regulations governing limited recourse borrowing by an SMSF, the maximum tax benefit from deductions including borrowing costs, depreciation allowances and other expenses is the superannuation fund tax rate of 15 per cent. In pension funds there’s no tax benefit.
In personal names, the tax benefit ranges from 34.5 percent to 49 percent, providing a much larger benefit from borrowing, especially to purchase low-yielding property assets.
Complicating matters for SMSF property purchasers, regulations prohibit related party transactions except in the case of business rental property. In practical terms, the restriction on related party use reduces the tenancy options, preventing use of the property by owners or their children.
No such limitations apply to the use of negative-geared personally owned properties which can be used as a future personal residence by the owner or children. Even after the regulator’s tightening of individual investment borrowing, providing the collateral and obtaining a high loan-to-valuation ratio is much easier than borrowing in an SMSF.
The low 15 percent superannuation tax rate increases the attractions of owning high-yielding assets in super funds instead of in personal names. Property assets generating low current income and steady or even spectacular capital gains are better suited to personal portfolios, especially for longer-term investors.
In superannuation, any capital gains tax rate on gains realised after 12 months is only 10 per cent compared with up to 24.5 percent on gains realised in personal names. Given that capital gains tax is only payable when assets are sold, this advantage is most significant when assets are bought and sold regularly.
Property investments are generally held for longer, particularly compared with shares. For this reason, as well as the higher annual income including franking credits, borrowing to purchase shares in a super fund can help reduce capital gains tax bills.
Borrowing to purchase investments increases the risk of losses if the investments perform poorly. Investors need to be cautious when contemplating gearing their portfolios. Losses generated in superannuation and pension funds are difficult to recover as are losses in personal names. The one consolation for personal investors is the greater value of carry-forwarded capital losses as an offset to future capital gains.
Considering all the above factors, borrowing in an SMSF has major drawbacks.
Daryl Dixon is executive chairman of Dixon Advisory and can be contacted <a href="https://www.dixon.com.au" target="_blank">here</a>.
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