Ray White Portfolio Magazine - June 2024

JUNE 2024

SELLING BIG UNDER THE HAMMER

EXPERTS DISCUSS SOUTH EAST QUEENSLAND’S DEVELOPMENT MARKET

WHERE ARE THE BRIGHT SPOTS FOR THE COMMERCIAL PROPERTY MARKET?

This month in Portfolio

As we round out the financial year, we’re proud to present the June edition of Portfolio magazine.

In this edition we will hear from some of our top auction agents who have successfully sold larger commercial assets under the hammer at competitive auctions. They discuss why they do it, how they make them work, and what the benefits are for clients.

We also hear from Ray White Head of Research Vanessa Rader who takes a look at the bright spots in the commercial market, after what has been a challenging year for some markets, with the industrial sector still seeming to outshine the rest.

May’s Between the Lines Live webinar focused on the development market across south east Queensland, where Vanessa interviewed Ray White Special Projects director Mark Creevey, and Ray White Valuations regional director Ash Forbes. You can check out what Mark and Ash had to say about the market inside this month’s edition.

James Linacre Head of Commercial RWC Australia

and New Zealand

Quick jump to a region

JUMP TO A REGION

Where are the bright spots for the commercial property market?

VANESSA RADER Ray White Head of Research

The latest PCA/MSCI property returns data has been released for the quarter ending March 2024, showing some sobering results across the commercial property market. Capital growth is in negative territory for nearly all asset types and locations across the country as the revaluation of assets puts the spotlight on cost of financing, returns and the rapid escalation of prices over the last few years. Risk premiums have re-emerged for most properties as bond rates move ahead of many yields achieved for commercial assets particularly during the 2021/22 period. Despite heavy losses in capital growth, encouragingly, income returns continue to maintain, resulting in total returns for some asset types remaining in positive territory.

Capital depreciation greater then income returns across many commercial asset types

% annual change, Australia

Chart: Ray White • Source: MSCI Inc, 1Q 2024

The office market has felt the brunt of these losses, with both non-CBD and CBD office markets recording -12.6 per cent and -11.9 per cent capital losses respectively over the past year. However, looking city-by-city there is still some positivity around. Perth CBD remains the stand out office performer this period, despite capital growth recorded at -5.7 per cent, income returns of six per cent offset this keeping total returns in positive territory, notably in the Premium and A-grade sector.

For the retail sector, total returns show greater optimism. There has been a flurry of shopping centre transactions so far this year, testament to increased confidence in this sector. However, there is no doubt these corrections have spurred on spending with capital declines recorded across all retail types in all locations. Although, strong income growth has resulted in uplifted total returns for some assets. Overall secondary retail has outperformed with total returns of 1.5 per cent (thanks to 6.1 per cent income growth), while prime retail achieved 0.3 per cent.

Looking more locally, strong income improvement for Western Australia and Victorian neighbourhood and sub-regional centres resulted in total returns both at 2.4 per cent. Victoria outperformed again for major, super regional centres recording 5.3 income growth to keep total returns at 1.4 per cent, while New South Wales total returns sat at 0.6 per cent.

Limited markets show capital growth, but total returns still positive for some locations and asset types

% annual change, Australia

Income return Income return

Sydney Central West - Industrial

Western Australia - Industrial

Sydney South - Industrial

Sydney Outer West - Industrial

Sub Reg. & Neighb. VIC Retail

Major Reg. Super Red. and Regional VIC Retail

Sub Reg. & Neighb. WA Retail

Major Reg. Super Red. and Regional NSW Retail

Perth CBD - Office

Chart: Ray White • Source: MSCI Inc, 1Q 2024

However, industrial remains the golden child of the commercial property sector. Limited supply and constrained land saw returns for built form remain elevated. Secondary industrial actually outperformed prime this period with positive capital growth, up 4.6 per cent for a total gain of 8.6 per cent - the most outstanding result of all asset types and locations across the country. Results trended well ahead of the prime market with total returns of just 0.3 per cent. Quality results in warehousing, industrial estates spurred on appreciation in these total returns.

Western Australia led this charge with 6.5 per cent total return (albeit just 0.1 per cent representing capital growth). Total returns for New South Wales hit 2.9 per cent with a small 0.1 per cent capital decline. However looking more locally, Sydney’s Central West has shown outstanding results, recording capital improvements of one per cent this period to grow total returns to 4.9 per cent. Despite Sydney’s Outer West and South still seeing capital

Experts discuss south east Queensland’s development market

MORE THAN 100 PEOPLE TUNED INTO RWC’S MAY BETWEEN THE LINES LIVE WEBINAR, WHERE A PANEL OF EXPERTS DISCUSSED THE DEVELOPMENT MARKET ACROSS SOUTH EAST QUEENSLAND.

Ray White head of research Vanessa Rader hosted the webinar, and was joined by Ray White Special Projects director Mark Creevey, and Ray White Valuations regional director Ash Forbes.

Mr Creevey said the south east Queensland development site market was receiving a lot of interest from both local and interstate investors.

“Demand is across all scales of the market, but demand is constrained by the availability, so what is available is very strongly contested,” he said.

“There’s a strong pool of local developers but also a lot of interest from interstate groups, particularly for large sites.

“There’s challenges in the southern markets, particularly Melbourne, and many of them see opportunities in the south east Queensland market, but that interest is creating more competition for the limited sites which are available.”

In the off-the-plan development market, Mr Forbes said a lot of developers were struggling with projects’ feasibility.

“What we’re seeing a lot of contracts being cancelled by developers at a scale i’ve never seen before,” Mr Forbes said.

“The projects are being given back to agents to sell a second time to improve their feasibility.

“They’ve had a lot of success with buyers re-engaging at the new price points. You’re seeing products being sold twice before they’re even off the ground. Our laws in Queensland allow for that to happen.

“This is due to the uplift in the cost of construction. It’s really unusual times.

“People don’t want to have to dip in another 15 per cent, but they realise if they don’t then they might miss out entirely due to the lack of new stock coming into the Gold Coast pipeline.”

Mr Creevey said finance was not an issue in the market, but construction was providing some challenges.

“There is a lot of pressure on construction, particularly in the high density market,” he said.

“There’s still a lot of builders operating in the home builders space but you’re looking at a longer lead time than we’re used to. But as you get into

high density development there’s less builders operating in that space.

“Finance is not the issue in the market. Non-bank lenders are preferred, which is not what we’ve traditionally seen.

“There is also a lot of generational wealth. A lot of deals we’ve done in the past few months have been backed by private equity.”

Ms Rader asked where the opportunities lie in south east Queensland.

“People look at the SEQ market and have confidence in the long term outlook,” Mr Creevey said.

“It’s difficult to get into the market, but once you can get something, the opportunity is enormous.

“Off the back of continued low supply, the demand for product will be sustained and with that supply and demand equation there will continue to be strong uplift in values.

“People come here for lifestyle and employment, the coastal markets have always been in high demand.”

Agents sell big under the hammer

How do you make them work for you?

VINES RWC WESTERN SYDNEY

What made you decide to start running auction campaigns for larger commercial assets?

People understand auction and are comfortable with it as a method of sale. They can see who they are competing against and it will often bring out people’s competitive nature which ensures the best possible price for vendors.

After all, in the competitive landscape of commercial real estate, the strength of your team can make all the difference in maximising the value and success of your assets.

We would typically do auctions where there is a need for transparency and where we believe that there will be strong levels of interest from varying groups. It also offers a greater amount of finality and certainty around timing that EOI or ‘for sale’ campaigns do not offer. I think that many commercial agents don’t have the experience or confidence to run larger properties as auction campaigns, and so don’t even consider them, which in my opinion is a mistake.

What are the benefits for your clients/ why should they take their commercial properties to auction?

I would say it has to be considered on a case by case basis and what is best for the property. Auction is not always the right method. I believe that auctions offer many advantages including finality, transparency, and true market value. Often the properties we are selling are very difficult to value and auctions offer social proof to purchasers, making them comfortable to pay more.

What has been your best auction to date?

I have previously been involved in the sale of a trophy residential building in Edgecliff for $33.25 million. I also sold a property under the hammer last year for $19.25 million, and had two auctions in 2022 which sold for $17.25 million and $13 million.

PETER

PETER LAOUDIKOS RWC GOLD COAST

What made you decide to start running auction campaigns for larger commercial assets?

All our listings go to auction however there is a lot of cash in the marketplace at the moment and we want to work with those cash buyers, focusing on keeping our hands out of valuations and any form of conditions in general. We feel like through the auction process, it provides our sellers with the most competitive environment to help them maximise their price.

How do you make them work for you and your clients?

We heavily focus on buyer creation and competition. We utilise the marketing spent by our clients in combination with our database and buyer management to help put these buyers in a position to compete for our clients properties.

What are the benefits for your clients/ why should they take their commercial properties to auction?

Buyer competition, competitive tension and unconditional contracts provide our clients with the safest and most secure sale process. With limited supply and strong buyer demand, it seems fit to create a competitive environment for both our sellers and buyers.

What

has been your best auction to date?

We’ve enjoyed every auction that we have processed, however, some particularly memorable sales include 15 Bay Street, Southport (pictured above) which sold under than hammer for $7.75 million; 107-115 Spencer Road, Carrara, which sold for $6.055 million; 6 Ereton Drive, Arundel, which sold for $4.3 million; and 74 Currumbin Creek Road, Currumbin Waters which sold for $2.9 million. These are clear standouts of an auction process run well, creating strong sale prices and yields for our sellers.

SCOTT STEPHENS RWC SYDNEY NORTH

What made you decide to start running auction campaigns for larger commercial assets?

We recommend to our clients looking to sell significant commercial properties that we proceed to sale via public auction, primarily due to the value of transparency and creating competition amongst owner-occupiers and investors at an auction. When a property is advertised as going to auction, it builds demonstrably high levels of enquiry and interest within the buyers’ market. The introduction of competition for a sale enables buyers to act with more confidence and increases appeal. It also puts the property in its premium in the mind of buyers, offered for a limited time until the auction day. It also removes any ‘cooling off’ periods, which is in the interest of the vendor, as the sale will be made unconditionally when the hammer falls.

How do you make them work for you and your clients?

Our team makes auctions work by placing the property in sight of every potential purchaser we have within our database and

contact list - in order to ensure that we have not missed the chance to discuss a property with the ‘right buyer’. Through a variety of different marketing methods, including EDMs, online listings, signboards, agent referrals, contacting known investors and/or developers and cold calling, we are able to advertise the auction and property to be sold, and ensure that the wider community is informed about it.

We make the actual auction itself work by remaining communicative with all parties involved in the process, from the vendor to potential purchasers and solicitors. Every offer that comes through is taken to the vendor and discussed with them prior - in order to gauge the price point we can expect bidders at the auction to work with. With weekly updates provided through a vendor report, the vendor is also able to track how their marketing activities are playing out, as well as what other channels their property has been advertised on.

What are the benefits for your clients/ why should they take their commercial properties to auction?

The natural competition an auction creates is the primary reason for vendors to proceed with this type of sale for their commercial asset. By providing prospective purchasers with a time frame within which they act, it can drive the sales price for your property and foster competitive bidding on auction day. This will ensure the vendor is maximising the return on their investment and can rest assured knowing they will be selling the property at its best price in a transparent marketdriven way.

What has been your best auction to date?

One of our best auctions to date was the online auction of 89 Edinburgh Road, Castlecrag in 2021. Sold on the backend of NSW’s lockdown period, buying activity in the commercial world was avid; with this property maintaining over 85 enquiries, 18 contract holders, and seven registered bidders at auction. Advertised as a single-storey mixed-use freehold boasting fantastic development upside, this property ended up being sold considerably above the pre-auction estimate at $3,218,000 - with a yield of 3.4 per cent.

Assets under management

RWC manages properties across all asset classes right across Australia. Take a look at some of our top managements from across the nation. RWC will have a management specialist located right near your property, so enquire with us today.

FYSHWICK, ACT

5,959m2* industrial asset, fully leased to well regarded national tenants, and plans approved for another four units

CAPALABA, QLD

8,100sqm* site with massive street frontage in SEQ’s premier large format retail precinct, accommodating a 2,500sqm* new car showroom and dealership workshop RWC

RWC SOUTHWEST

SUMNER, QLD

Multi-tenanted facility with functional configuration and long term tenants providing a stable income. Clear frontage to the Centenary Highway provides exposure to over 367,000* passing vehicles weekly

RWC NORTHERN CORRIDOR GROUP

EUMUNDI, QLD

470m2 freestanding freehold asset occupying a 1059m2 of prominent land in Eumundi’s town centre

RWC CANBERRA

Queensland

Proximity

1,631sqm site within Weinam Creek PDA

DA approved for 37 dwellings over 5 levels

Elevated street with potential Redland Bay views

200 metres from the Marina and new Satellite Hospital

Redland Bay is the fastest-growing suburb in the area

Josh

0452 604 478 josh.harris@raywhite.com

Morley 0476 168 712 adam.morley@raywhite.com

Alicia Pregnell 0481 218 481 alicia.pregnell@raywhite.com

raywhitecommercial.com

1,933*m2 of land

0416 628 930

100*solar panels on the roof

$167,305*pa net income + GST + Outgoings

30-50 Warrego Highway, Chinchilla, 4413

Chinchilla is on the move and we are looking for a developer keen to evolve this site.

Located on the eastern entrance to Chinchilla, beside the well developed Ampol/KFC, this site lends itself to a multitude of opportunities.

One building or a multi-tenanted facility, all options can be explored on 3.23 hectares*.

•Total land size: 3.23 hectares*

•'Mixed Use' zoning

•Warrego Highway frontage with additional street access and exposure from Price Street

•Information Memorandum available on request

•Seller is keen to sell ASAP

Prime position warehousing

697sqm*

NSW | ACT

176-178 Princes Highway, Beverley Park, 2217

DA approved for 25 residential units

Favourable mix including 72% of 2 and 3-bedroom units

Generous internal areas with large balconies

Creatively designed by Loucas Architects

Holding income from existing improvements

Strong population projection for the surrounding LGA

Short distance to Carlton and Allawah train stations

Hadgelias

SC

Shops 1-6/387 Macquarie Street, Liverpool, 2170

Shops 1-2 - 220sqm* across two titles

Shops 3-4 - 279sqm* across two titles

Shops 5-6 - 268sqm* across two titles

Situated on the ground floor of a residential building

Three street frontages with expansive window exposure

To be sold with vacant possession

Easy access and in close proximity to all public amenities

SC

area - 3.28 hectares*

Zoned: RU2 - Rural Landscape

Current design layout for a timber mill operation

Strategically positioned on a large corner block Residential home currently returns $400 per week*

High exposure along the main arterial Wollombi Road

Must be sold

745

70ha* of pastures and improved land

Main colonial homestead with 10 ensuite bedrooms

5 separate accommodation houses with amenities

Wedding reception hall/conference facilities w/ kitchen

Swimming pool and tennis court

Potential for renovation, development and subdivision^

Existing use rights as a tourist operation/farm stay

Expressions Of Interest

Closing Thursday 20 June at 12pm (AEST)

Samuel Hadgelias 0480 010 341

Liam Regan 0488 542 600

Gene Fairbanks 0448 613 665

Andrew Jackson 0405 355 972

RWC SC

raywhitecommercial.com

40-44 Tudor Street, Hamilton, 2303

High exposure development site with DA approval & multiple tenancies

An opportunity exists to secure one or both of the properties on offer. Benefit from current DA and improvement or develop further^.

40 & 42: Currently vacant but DA Approved for the construction of one (1) commercial lot and eight (8) apartments.

44: Tenanted by one (1) shop/cafe and three (3) residential units.

SITE AREAS

Lot 1 (42) 177m2*

Lot 2 (40) 177m2*

Lot 24 (44) 177.1m2*

478

For sale - The Flinders Hotel

Rare opportunity to acquire a prominent freehold property in the highly sort after inner-city suburb of Surry Hills.

•Total building area 599sqm*

•Zoning B4 Mixed Use (MU1)

•Corner position on three street frontages

•Proposed plans to increase building area to 861.89sqm^

•Short term lease with holding income to be sold as agoing concern

•Full hotel liquor license and 24-hour trading permit (Mon-Sat)

15-17 Old Northern Road, Baulkham Hills, 2153 Expressions Of Interest

Closing, Wednesday 26 June 2024 at 3pm

Entire complex of 32 units (38 dual key) + 2 retail areas

•Favourable unit mix of 12 x 1 bedroom, 3 x studios, 21 x 2 bedroom and 2 x 3 bedroom units (note this inclusive of six (6) dual key units)

•Current annual passing income of $1,380,103* with scope to increase

•Diverse income streams

•Ideal for investors, strata sell down groups or housing providers

•Strata approved but not registered

•Efficient floor plan layouts with balconies

•Depreciation benefits

•Ideal opportunity to capitalise on the current housing shortage, migration boom and rising rents

•Opposite Grove Square - Baulkham Hills Shopping Centre

•3.4km* to Castle Towers Shopping Centre

397 696

Vines 0449 857 100 Victor Sheu 0412 301 582

raywhitecommercial.com

Western Australia

Lachlan Burrows 0499 552 296 lachlan.burrows@raywhite.com Tom Jones 0478 771 117 tom.jones@raywhite.com

Subdivision

VIC | TAS

or invest | industrial warehouse with monthly tenancy

•Total building area | 190m2*

• Clear span warehouse

• 6.2m* internal clearance

• Month to month Tenancy in place

• Abundance of 3 phase power outlets

• Amenities | lunch room & toilet

• Container height roller door

• Four (4) on-site car spaces

• Suitable for container loading / unloading

• Industrial 1 Zone (IN1Z)

54/266 Osborne Avenue, Clayton South, 3169 RWC Oakleigh raywhitecommercial.com

Theo Karkanis 0431 391 035 theo.karkanis@raywhite.com

11/35-41 Westpool Drive, Hallam, 3803

6 Spring Square, Hallam, 3803

George Ganavas 0478 634 562 george.ganavas@raywhite.com

& Online | Thursday 20 June 2024 at 1:30pm *Approx

•Total land area | 186m2*

• Total building area over two levels | 173m2*

• Combined rental | $68,400 p/a + GST

• Both lease terms: 3 + 3 + 3 Years

• Tenants pay all applicable outgoings

• Fixed 4% annual increases

• Anchored by Coles Supermarket

• Abundance of public car parking

• Easy access to major arterials including the Monash Freeway (M1) & Princes Highway

• Rear access via R.O.W

• Commercial 1 Zone (C1Z)

Theo Karkanis 0431 391 035 theo.karkanis@raywhite.com

Anthony Anastopoulos 0488 095 057 anthony.anastopoulos@raywhite.com

Oakleigh raywhitecommercial.com

•Total building area | 297m2*

• Including ground office area with heating/cooling | 200m2*

• Plus bonus mezzanine/storage area | 200m2*

• Leased until 30th June 2027 with no further options

• Combined rental income | $39,496 p/a + GST + outgoings

• Rental increases | 3% fixed annually

• Five (5) car spaces on-title

• Container height motorised roller door

• Securely gated estate

• Industrial 1 Zone (IN1Z)

*Approx

George Kelepouris 0425 798 677 george.kelepouris@raywhite.com

Anthony Anastopoulos 0488 095 057 anthony.anastopoulos@raywhite.com

RWC Oakleigh raywhitecommercial.com

184 Warrigal Road, Oakleigh, 3166

Stand alone retail investment with 3 b/r residence

•Total Land area | 158m2*

• Total building area| 170m2*

• Including retail area | 50m2* plus a three (3) bedroom dwelling

• Three year lease commenced 15th May 2024

• Current rental | $25,200 p/a* + GST + outgoings

• Fixed 5% annual increases

• No further options

• All major arterials and conveniences at your doorstep

• Two (2) car parks at rear

• Irreplaceable position at the intersection of Warrigal Road and North Road

• Tenant responsible for usual outgoings

• Single tenant minimum management investment

Auction Onsite & Online Thursday 13 June 2024 at 11:30 am

George Kelepouris 0425 798 677 george.kelepouris@raywhite.com

Anthony Anastopoulos 0488 095 057 anthony.anastopoulos@raywhite.com

RWC Oakleigh raywhitecommercial.com