Ray White Portfolio Magazine - December 2022

INDUSTRIAL IS CROWNED THE TOP PERFORMING ASSET CLASS A DAY IN THE LIFE OF AN ASSET MANAGER TRANSACTION HIGHLIGHTS OF 2022

In a year which has provided uncertainty as we adjust to a post-Covid environment, Ray White Commercial has continued to achieve outstanding results.

In 2022 Ray White Commercial completed approximately $5 billion in transactions. This shows the continued strength of Ray White Commercial during a changing economic period.

As we begin to see a reduction in residential rental yields as residential property values stabilise after the highs of 2021, commercial assets have not seen the same declines. In the new year, I believe we will see more appetite from traditional residential investors migrating to commercial investment.

In 2023, I also expect to see office occupancy continue to grow as we see businesses starting to create environments and spaces to encourage people to come back into the office. I expect the new year will

see more movement in our CBDs across the country which is positive news for our commercial markets. The more people who head back into the office, the more it activates CBD retail and hospitality.

There is plenty to look forward to in the commercial property market in 2023 and, as it begins to stabilise from the unprecedented highs of the past few years, the knowledge and skills of experienced agents has become more important than ever.

I look forward to 2023 and seeing what our Ray White Commercial network can achieve. I want to thank all our clients who continue to support us, and I hope to work together again in the new year.

ANDREW FREEMAN HEAD OF AGENCY OPERATIONS

VANESSA RADER

AND THE WINNER IS… TOP PERFORMING ASSETS OF 2022

AFTER ROBUST LEVELS OF TURNOVER AND RAPID REDUCTIONS OF INVESTMENT YIELDS DURING MUCH OF 2020 AND 2021, 2022 WAS ALSO TRADING WELL BUT ENCOUNTERED CHALLENGES FROM THE FIRST UPWARD INTEREST RATE MOVEMENT IN MAY. NOW, SEVEN RISES LATER, MANY BUYER GROUPS HAVE TAKEN A BREAK FROM COMMERCIAL PROPERTY INVESTING WHILE OTHERS PONDER IF NOW IS REALLY THE RIGHT TIME TO SELL.

We have seen volumes fall away in the second half of 2022 and confidence levels dip broadly across the marketplace, while financing is still available, particularly from alternative financiers, the cost is such that yields have to increase. Despite this, there continues to be winners in 2022 with a range of savvy investors happy to capitalise on long term opportunities.

1. Industrial

In first place is industrial, which has been the golden asset class of the last few years. Demand has been growing off the back of logistics, distribution and transport, particularly last mile solutions, together with the growth in small business and local manufacturing. The increased demand by users, coupled with limited supply additions over the past few years, has resulted in vacancies across the country in the sub 1 per cent range, therefore, face rents have seen outstanding levels of increase. Furthermore, with little supply on the horizon and many markets hampered by tight available developable land, the future for land values appears favourable. While yields are unlikely to sustain their lows given the pure cost of finance, the longer term prospect of high occupancy and increased returns will see good results for industrial owners. Those assets well located on major transport nodes or with development potential are likely to continue to enjoy the benefits of this asset class in years to come.

across all demographics. Specialised services have grown in popularity across the once forgotten age group, particularly in sports medicine, preventative care, cosmetic services, as well as holistic or alternative medicines. With increased demand has come improvements in leasing rates and, with limited purpose built facilities, the readaptation of other assets such as retail to cater for the growing demand. Often secured by long leases with fixed increases, these assets are kept to a high standard given their medical use, which is attractive to the investor looking for a secure, growing income stream. While yields will see some movement off the lows achieved last year, the long term attraction of medical facilities cannot be underestimated particularly as our population continues to grow.

2. Medical

In second place is medical assets. The medical asset class was gaining momentum well before COVID-19 hit, which shone a light on additional needs in pathology services, GPs and hospital facilities. The medical sector has been evolving over the years, once considered a segment which catered for the very young or very old, we are seeing greater medical needs

3. Childcare

In third place is childcare assets. Childcare has been one property type which has become attractive over the past few years. The “set and forget” nature of the asset assured investors a secure, long term income stream and its affordable price point making it attainable for a range of buyers. While yields have been at a low rate for a long time, there is expectation these will tick up given the increased cost of finance. Despite this, the increases in government subsidies anticipated will do much to further spur on this sector in terms of demand and likely growth in returns. Again, an asset class with high occupancy, assets which have the ability to be redeveloped or extended will benefit from an uplift in return with those well located in metropolitan areas likely to hold their value over regional assets. Remembering commercial property is a long term asset, the underlying land value for many childcare assets is another positive for this asset class.

TRANSACTION HIGHLIGHTS OF 2022

152 - 180 GRAMPIAN DRIVE, DEEBING HEIGHTS

Sold for $40.5 million Ray White Special Projects

Mark Creevey, Matthew Fritzsche, and Tony Williams

Date: April 2022

This 115.98ha large scale land subdivision site was development approved for 892 lots, a neighbourhood centre and school site. Mark said the site attracted a lot of interest from developers. “Interest in this site was strong with 11 offers received at close of the expressions of interest campaign. The buyer was a private Melbourne based development company,” he said.

73 IPSWICH ROAD, WOOLLOONGABBA

Sold for $40 million Ray White Commercial Bayside Nathan Moore

Located within the Olympic Stadium Precinct, this 1.2ha site is one of the largest single-lot holdings in the inner ring of Brisbane.

The seller, who had held the property since the early 2000s, was a long term client of Nathan’s. He said over the course of two years they had fielded multiple off-market offers to buy the site.

“In consultation with the owner and following the inclusion of the site in the Olympic Stadium Precinct, we became aware that the State Government had requirements for transport infrastructure in the area,” Nathan said.

“On our advice, a formal marketing campaign was strategically developed and implemented to pit the private and institutional buyers looking to capitalise on the Olympic Precinct, against the State Government in a competitive process.

“The campaign commenced in May 2022, and following a strong media presence across multiple platforms we shortlisted the top three offers and negotiated a final outcome with the eventual buyer - the Queensland Government.”

TRANSACTION HIGHLIGHTS OF 2022

3 & 5 MOUNT STREET, MOUNT DRUITT

Sold for $37 million

Ray White Commercial Western Sydney Peter Vines

With a total land area of 6839sqm, this property comprises two buildings and received a lot of enquiry throughout its expressions of interest campaign. The property was partially leased by Centrelink with other tenants including different government agencies. Pete said the property was a record breaking commercial property sale for Mt Druitt.

“Given the dollar quantum of the property, investors were predominantly high net worth individuals based locally and interstate as well as syndicate buyers and smaller funds managers.” The property was snapped up by a private syndicate.

8 FIRST AVENUE, BLACKTOWN

Sold for $37 million

Ray White Commercial Western Sydney Peter Vines

Purpose built for Centrelink, this 4437sqm building received plenty of investor interest due to its strong tenancy, being fully-leased by Centrelink. The property was a record breaking commercial sale for Blacktown and was purchased by a private syndicate.

Pete said COVID 19 had changed the way investors viewed property. “They are now more carefully scrutinising who their tenant is and what their ability to pay the rent is in changing economic times. Centrelink and government agencies are the best tenants you can get,” he said.

DAY IN THE LIFE OF AN ASSET MANAGER

TUSHAR KUMAR

Ray White Glen Waverley

How does the average day look for you?

Mornings begin with checking and responding to urgent email and phone calls, followed by a brief team catch up on the tasks for the day. I always make sure to action diary reminders by lunch time and action arrears after lunch. Then I follow up on pending maintenance. On Thursdays I take time to plan the weekly and monthly tasks.With the growing team, my time is split between PM related tasks and training and mentoring new team members but as I currently continue to manage a full portfolio I do spend approximately 75 per cent of my time doing so.

What do you love most about being a PM?

Personally, I have always enjoyed being the problem solver. It is a skill that comes across professionally in my daily dealings with clients. As a PM, it is fair to say that no one calls a PM until they need something or there is a problem. Offering that support and assistance tackling delicate to complex matters is truly rewarding.

How did you get into it?

Believe it or not, I have a Masters in IT from Monash University, did programming for a few years and soon realised that my calling is somewhere else. With my dad in property back home, I always had that affiliation towards property and soon enough I took the leap. I am now going 10 years strong in this industry.

What is the best advice you’ve ever given or received about property management?

Seek to understand, prior to being understood - this was great advice from one of the directors, and it is effective. I usually say to my peers that a PM has the most opportunity to build the relationship with landlords, which one day turn into vendors, and at every step always aspire to add value, just do that extra bit as it all banks up in your favour.

How does the average day look for you?

Every day as a commercial property manager is different and full of surprises. I usually start the day answering emails, I can get anywhere from 50-70 emails a day. Depending on the day I may have routine inspections or final inspections booked in and am often meeting tenants on site to handover keys or to organise signing of documents.I spend all day, every day working on property management related tasks. I manage a large portfolio that can be quite demanding.

What do you love most about being a PM?

I love to stay busy, and as a commercial property manager

I am always busy actioning emails/phone calls and putting out ‘fires’, so I really thrive in this environment. I also enjoy the fact that we deal business to business rather than business to the general public.

DAY IN THE LIFE OF AN ASSET MANAGER

How did you get into it?

I really fell into this position and I am so glad that I did. I believe I was really meant for property management. I started out with Ray White Commercial WA in the admin department and after a few months in admin I developed an interest in property management.

From there, with a lot of hard work, I progressed quite quickly from administration, to assistant property manager and now finally a property manager with my own portfolio - I wouldn’t change a thing.

What is the best advice you’ve ever been given about property management?

The best advice I have been given about property management is don’t take the negatives personally and try not to let it affect you emotionally. The advice I would give to other PMs is to breathe!

CARLY BOOKER

Ray White Commercial WA

WHAT HAS BEEN YOUR HIGHLIGHT OF 2022?

TRACEY RYAN RAY WHITE COMMERCIAL NOOSA AND SUNSHINE COAST NORTH

A highlight for me was seeing new agents in the office experience a hot market and develop their business and skills to a new level. We all benefit when everyone does well! I hope I won’t have to wait until I am 80 for the real estate cycle to roll around again - the excitement might be too much.

FRANK GIORGI

RAY WHITE COMMERCIAL CANBERRA

My personal highlight was my one year old daughter taking her first steps. Professionally it would definitely be the sale of 16 Ipswich Street, Fyshwick. The 32,660sqm ex Shell depot site sold to a developer who will transform Fyshwick East into a state of the art warehouse precinct. The deal took over 24 months from go to wo.

CHARLES DONNE

RAY WHITE COMMERCIAL QLD

My biggest highlight in 2022 was Ray White’s Connect conference. It was a great opportunity to meet fellow Ray White Commercial agents from all other states and cities. I found all the presentations, performances, and talks very interesting, however Stephen McGowan’s talk on six years as an Al Qaeda hostage was the one to take the cake!

PHIL ZOITI

RAY WHITE COMMERCIAL WA

A big highlight for me was the opening of the WA border back in March. We have also had a very busy year in particular selling some high quality hotel and tourism assets both in the regional areas and metro (both off and on market).

•545m2approx.spaceonthecornerofSturtandRussellStreets,Adelaide.

•Two-storyofficespacebeautifullyrenovatedwithalift,cellar,balcony&large windows.

•Valuableonsite,undercovercarparkingwithaccessviaRussellStreet.

WE MANAGE