Strata offices hit the hot spot for investors

Strata sales are on the rise as investors move to take advantage of favourable economic conditions and secondary stock is withdrawn across capital cities.
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Low interest rates and the tight leasing market have fuelled an increase in demand for strata space, according to Knight Frank agents.

Owners have experienced exceptional capital appreciation in both the Sydney CBD and North Shore markets, with the average rate per sqm increasing across all precincts in Sydney’s CBD by 26.6 per cent.

According to Charter Keck’s analysts, Melbourne’s established office market remains concentrated in and around the CBD. Melbourne’s road and rail infrastucture has been and remains radial in nature, feeding the inner city catchment of white collar workers via the transport linkages.

Despite perceived pressures of the new collaborative working environment eroding tenant demand, the Melbourne strata office market has been a strong asset class for owner occupiers and investors since the popularisation of this office type in the 1980’s.

Strong employment growth has seen CBD office space being leased with noticeable reduction in incentives.

Glenn Lampard, strategic reseach principal at Charter Keck, said in Melbourne purchaser demand for CBD strata office has strenghtened in recent years.

Mr Lampard said owner occupiers of strata office have prospered in the current low interest rate environment, with strata a genuine alternative to leasing.

According to Knight Frank research, during the 2016/17 financial year, the western corridor in Sydney’s CBD recorded the largest annual increase of 34.8 per cent to measure $8,142 per sqm, while the waterfront precinct remaining the standout performer with rates at $11,665 per sqm at the end of the financial year.

For the current financial year, early indicators are showing values rising even higher, with recent results above $12,000 per sqm.

Recent strata sales in prime CBD locations reflect the rising rates, with 234 George Street selling at $15,234 per sqm, 37 Bligh Street selling at $14,900 per sqm, 183 Macquarie Street selling at $13,768 per sqm and 70 Castlereagh Street selling at $12,596 per sqm.

Knight Frank’s senior sales executive, Sydney CBD, Daniel Courtnall, said the uplift in strata activity is expected to continue.

“Sydney CBD’s strata market continues to go from strength to strength and doesn’t look to be slowing. The last financial year showed record strata sales of over $225 million, and with continued stock withdrawals and interest rates remaining steady, we expect strong demand for strata property to continue,” Mr Courtnall said.

Knight Frank’s sales executive, Sydney CBD, Daniel Francis, said owner occupiers continue to dominate the strata market.

“The strata market offers a more affordable option for business owners compared with leasing given the current lending rates versus a tight leasing market,” Mr Francis said.

”We are also experiencing strong interest from investors as strata offices provide secure long-term leases for landlords with a higher yield which is an advantage compared with residential property. This, plus historically low interest rates of 1.5 per cent, make strata offices a very attractive investment option.”

Increased rates in the Sydney CBD has seen some investors turn their attention to the North Shore strata market, which offers a more affordable price bracket. In the 12 months to July 2017, North Shore’s strata market recorded slightly higher transaction volumes of $98.5 million across 118 sales, a 2.8 per cent increase year-on-year and well above the 10-year average of $65.2 million.

Knight Frank’s sales executive, North Sydney, Fiona Cutler, said rates are continuing to rise in the North Shore.

“Recent transactions would suggest that rates are still increasing, with recent North Sydney strata sales above $8,000 per sqm, and Chatswood strata transactions surpassing $9,000 per sqm. This is a direct result of residential activity outpacing commercial development.”

Recent strata sales in key North Shore locations reflect the rising rates, with 1 McLaren Street, North Sydney selling at $8,718per sqm, 7 Railway Street, Chatswood selling at $9,483 per sqm, 813 Pacific Highway, Chatswood selling at $9,453, and 1 Katherine Street, Chatswood selling at an impressive $16,667 per sqm.

This story Administrator ready to work first appeared on Nanjing Night Net.

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