This month in Portfolio
RWC is proud to present the October edition of Portfolio magazine as we enter the final quarter of 2024.
In this edition Ray White Head of Research Vanessa Rader takes a look at what the number of new business starts means for the commercial property market throughout Australia.
RWC Property Management Performance Specialist Leteicha Wilson provides some understanding for landlords on what they need to know about outgoings.
We also look back on the September edition of RWC’s Between the Lines webinar, where Vanessa chats to RWC WA agents Chris Matthews and Tom Jones about Western Australia’s industrial property market.
The next Between the Lines webinar will be held on October 16 and will take a look at the small investment market. Vanessa will chat to RWC Bayside director Nathan Moore and RWC Glen Waverley director Ryan Trickey who will discuss the owner occupier and investor activity fuelling the sub-$5 million market.
James Linacre Head of Commercial RWC Australia and New Zealand
Quick jump to a region
Positive signs for commercial property as business numbers climb
VANESSA RADER Ray White Head of Research
The latest data from the Australian Bureau of Statistics (ABS) reveals a continuing upward trend in new business formations. Despite nearly 363,000 businesses ceasing operations over the last financial year, this was more than counterbalanced by 436,018 new entrants, resulting in a positive net change of more than 73,000. This surge has expanded the total number of businesses in Australia to 2,656,344, marking a 2.8 per cent increase over the past year, and an impressive 17.2 per cent growth over the last five years. This expanding business landscape serves as a key indicator for the health of commercial property markets, signalling a likelihood of increased occupancy demand across various sectors including office, industrial, retail, and alternative uses.
The growth has been widespread throughout Australia, with NSW leading in absolute numbers, adding 25,569 new businesses. Victoria followed with an increase of 18,641, while the ACT and Western Australia both demonstrated the highest percentage growth at 3.5 per cent, adding 1,217 and 8,718 businesses respectively. This consistent growth across different regions underscores the robust nature of Australia’s business environment and its potential impact on commercial real estate demand nationwide.
The landscape of business sizes in Australia is also evolving, with significant implications for commercial property demand. In 2023/24, non-employing businesses saw a substantial 4.9 per cent increase, adding 78,144 new entities. Simultaneously, 33,783 previously employing businesses transitioned to nonemploying status, potentially dampening commercial accommodation requirements. However, larger businesses experienced notable growth, with a 5.7 per cent increase in companies employing 20-199 people and a 6.0 per cent rise in those with 200+ employees. Despite a 1.4 per cent decrease in businesses with 1-4 employees, the overall trend, particularly the expansion of larger enterprises, reinforces the need for more expansive commercial premises. This shift towards larger business structures suggests an increased demand for larger commercial spaces to accommodate growing workforces and operations.
Industry-specific trends are shaping demand for various types of commercial properties. The transport, postal and warehousing sector led growth with an 8.5 per cent increase, likely to drive continued demand for industrial and warehousing facilities. This consistent uptick over the last five years is putting further pressure on low vacancies across most Australian industrial markets, signalling a need for new development during a time of prolonged subdued construction activity. Healthcare and social assistance followed with a 7.7 per cent rise, a segment likely to continue growing as our population ages. This trend potentially boosts requirements for specialised medical facilities such as suites, medical centres, and private hospitals, as well as care facilities ranging from retirement villages to high-care aged care assets. The financial and insurance services sector grew by 4.8 per cent, offering hope for a revival in office space demand across the country. Conversely, the agriculture, forestry and fishing sector contracted by 1.3 per cent, while retail trade saw a slight 0.2 per cent decrease, potentially adding pressure to the bricks and mortar retail property sector.
The robust growth in business numbers, particularly among larger enterprises, paints an optimistic picture for commercial property demand across Australia. With significant increases in key sectors like transport, healthcare, and financial services, the outlook for industrial, specialised medical facilities, and office spaces is especially promising. This dynamic business landscape suggests a resilient and evolving commercial property market poised for growth and diversification.
What landlords need to know when it comes to outgoings
LETEICHA WILSON RWC Property Management Specialist
When managing commercial property investments, one of the most critical yet complex aspects for landlords to navigate is outgoings. These costs can significantly impact the profitability of a property, and understanding how to manage and recover outgoings from tenants is essential for maintaining financial performance & legal obligations.
WHAT ARE OUTGOINGS?
In the context of commercial real estate, outgoings refer to the costs incurred by the landlord in owning, managing, and maintaining the property. These can include:
• Council rates
• Land tax
• Body corporate levies
• Building insurance premiums
• Maintenance and repairs
• Cleaning and security costs for common areas
• Management fees
While residential leases tend to include minimal outgoings for the tenant, commercial leases often allow landlords to recover a substantial portion of these expenses from the tenant. Outgoings are either included in the rent (gross leases) or charged separately (net leases). Understanding this distinction is crucial for landlords to ensure they are adequately recovering costs.
Regardless of the lease type, it’s crucial for landlords to outline the specifics of how outgoings will be recovered in the lease agreement to avoid disputes. This clarity ensures both parties are on the same page when it comes to financial obligations.
THE IMPORTANCE OF PROFESSIONAL MANAGEMENT IN HANDLING OUTGOINGS
Recovering outgoings is not always straightforward, especially when dealing with multiple tenants or managing larger properties and navigating legislation around outgoing recovery. This is where the expertise of professional property managers comes into play. A skilled property manager can provide valuable assistance in several ways:
1. ACCURATE BUDGETING AND FORECASTING
One of the key roles of a property manager is to develop a precise and well-structured budget for outgoings. They will forecast the property’s operational costs, taking into account maintenance schedules, insurance renewals, and tax changes, and ensure these costs are factored into the tenant’s responsibilities. This proactive budgeting allows landlords to plan ahead and avoid unexpected shortfalls.
2. TRANSPARENT COST RECOVERY
A professional property manager will ensure that outgoings are transparently tracked and clearly communicated to tenants. This transparency reduces the risk of disputes, as tenants can see exactly what they are being charged for. Additionally, property managers can assist in negotiating terms that balance fairness for both the tenant and the landlord.
3. NAVIGATING COMPLEX LEGISLATION ON OUTGOINGS
One of the significant challenges for landlords is understanding and complying with the complex legislation that governs outgoings, particularly in retail leases. In some states, for instance, retail law prohibits the recovery of certain outgoings, such as land tax, from tenants. A professional property manager will have a deep understanding of these legislative nuances and ensure that landlords remain compliant with the law.
While outgoings can be a straightforward process with the right systems in place, there are common pitfalls that landlords should be aware of:
• Incorrect apportionment of outgoings: In multi-tenant buildings, ensuring each tenant pays their fair share can be tricky. A property manager will calculate the correct proportion based on each tenant’s space and negotiate any discrepancies.
• Failing to anticipate cost increases: Costs such as insurance premiums, rates, and maintenance can fluctuate. A skilled property manager will anticipate these changes and factor them into the lease review process.
• Lack of communication with tenants: Without regular communication, tenants may misunderstand what they are being charged for. A property manager will maintain an open dialogue to ensure all parties are aligned.
Outgoings are a significant aspect of commercial property management that can have a direct impact on the landlord’s bottom line. Properly handling and recovering these costs requires both precision and transparency. By engaging a skilled property manager, landlords can ensure that outgoings are managed efficiently, costs are controlled, and disputes with tenants are minimised.
Experts discuss Western Australia’s industrial property market
Hundreds of people tuned in to listen to the 25th edition of RWC’s Between the Lines webinar, where our panel of experts discussed Western Australia’s industrial market.
Ray White head of research Vanessa Rader hosted the webinar, and was joined by RWC WA joint managing director Chris Matthews, and sales and leasing executive Tom Jones.
“There is a fair bit happening in the market at the moment, transaction volumes are down, but we feel that it’s more to do with supply than demand,” Mr Matthews said.
“Demand is still off the charts high, there’s plenty of people looking, investors and occupiers. If the supply was there on the market then we do believe those volumes would be much higher.
“There’s lots of tenants looking as well with a really low amount of vacancy.”
Mr Jones said enquiry was coming from all size ranges and locations.
“The sub-500sqm space represents around 50 per cent of the availability, and the enquiry level is still very strong for that category.
“When you go to the 2000sqm buildings, there is a lot less supply but there’s also a lot less tenants looking for it, but there’s still a major bidding war going on.”
Mr Matthews said owner occupiers were very active in the market.
“Owner occupiers are outstripping the investors by far,” he said.
“If you’ve got a property coming to market vacant, an occupier will usually wait 6-12 months before wanting to move in.
We’re finding if there’s 2-3 years running on a lease and there’s no options, you’ll still get owner occupiers coming in and paying well beyond what an investor will pay.
“Our advice for sellers is you’re better off selling it vacant because that’s where your premiums will come from. Even though rents are quite high, when you add a 6-7 per cent yield to that, you’ll find the vacant possession price is a lot higher by 10-20%. You just need one keen occupier who is ready to come in and pay the number.”
He said there were a lot of mining services taking up owner occupier space, with a lot of sub-200sqm space being bought for use as “man caves” to store caravans and boats.
Mr Matthews said the investor space was also still active.
“What’s often happening is, whenever we advertise a property we’re getting more enquiry from investors but the owner occupiers are willing to pay the higher price,” he said.
Mr Jones said interstate investors were showing keen interest in Western Australia’s industrial market.
“In the sub-$1 million space investors are coming from interstate, mostly the Melbourne and Sydney markets where they’re probably used to a lot tighter yields than what we get over here,” he said.
“The local investors are often missing out unfortunately because they’re still looking for those 7+ per cent returns. The NSW and Melbourne markets are used to sub-6 per cent.”
With vacancy rates still very tight, Ms Rader asked where Mr Matthews and Mr Jones saw rents heading moving forward.
Mr Matthews said it was hard to predict.
“Personally I’ve found there are transactions at $180+ per square metre for warehouse space which is crazy considering a lot of suburban office space will lease at that rate or less,” he said.
“Fundamentally, it’s supply and demand, and supply is so tight which is what is going to drive the price. The issue is we’ve got no supply coming on to taper off those premium rental figures that are being paid.
“It’s also cyclical. I was around in 2008-2012 period and saw once the GFC hit and we saw rents spike and values spike. If you look at that same sort of cycle, the only thing that changed was Covid cash came in and other things the government did to make sure the country didn’t go into recession during that period.”
With scarce availability of land and high construction costs, Ms Rader asked Mr Matthews what the outlook was for the supply of new stock.
“Supply isn’t going to come until land becomes available, and even once it does you have the infrastructure problem. Western Power taking up to 15 months to get a new service connection,” Mr Matthews said.
“Having land rezoned, then potentially subdivided, power, building, occupied, it’s a long process.
“Even if you started something today it might be 18 months before you have it ready to move in to.
“If demand does taper off a little bit and supply does pick up, we could be in that transitional period. It will be interesting to see where the market is in 24 months time.”
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.
CONTACT HERE
RWC CANBERRA
FYSHWICK, ACT
Located in the rapidly gentrifying area of Fyshwick in Canberra’s Inner South, an impressive 856sqm warehouse/ showroom facility currently occupied by Dulux. A new 5 year lease has been negotiated and 100% of outgoings paid by the tenant.
RWC TOOWOOMBA
TOOWOOMBA, QLD
This group of retail tenancies is located in the burgeoning suburb of Middle Ridge, in south-eastern corner of Toowoomba. Tenancies of Middle Ridge Village include a supermarket, bakery, pharmacy, hair salon and Thai restaurant among others.
RWC BAYSIDE
YERONGA, QLD
This neighbourhood centre sits on over 6,000sqm’s of land with 3 street frontages and has a NLA of 2,414sqm and 25 tenants.
RWC SOUTHWEST
SHAILER PARK, QLD
Located in Shailer Park and occupying a 3,922sqm site with a long term education tenant in place. Features include ample on site car parking, 2,919sqm of air conditioned offices, board room space and indoor sports courts.
QLD
Sustainable building supplies business
Opportunity to acquire a leading sustainable building supplies company with little competition and an established reputation for high-quality products and excellent customer service.
•Supplier of innovative, eco-friendly wall and ceiling linings, screening, decking and more
•Flexible work schedule with most sales online and just 15-20 hours/week required at the warehouse
•Exclusive supplier agreements in place
•Consistent turnover, reflecting the business's stability and profitability
•Ability to stay in current location or easily relocate
•Enormous opportunity to expand nationally to create a powerhouse and hugely profitable brand
Metzo Noosa Resort, located at 152-158 Noosa Parade, Noosaville, 4566
Management rights in Noosa with water views
John Petralia is pleased to present Metzo Noosa Holiday Apartments management rights and manager's unit to the market for sale.
The resort is just 100m* to Noosa River and a flat walk to Hastings Street and Noosville's vibrant restaurant and bar precinct.
•Modern 3 storey resort with tropical landscaping
•Net approximately $200,000 per annum*
•16 of 18 apartments in the letting pool
•2 bedroom, 2 bathroom manager's apartment with water views, private garden and alfresco area
•Reception area attached on title
•Live on site or off site
•Heated pool and BBQ facilities
Off-street parking at rear for approximately 7 cars
exposure on road connecting Noosaville to Noosa
Secured lease until January 2026
Small caretaker house, carport, two sheds
Shower/toilet block with power and caravan pads
Redevelopment potential. Eco village plans available
The land is FIRB approved A unique location with historical significance
•1,801m2* NLA commercial building + 70 car parks
•Vacant possession potential
•Existing lease has termination clause (30 days)
•NABERS Rating - Currently an ‘Exception’
•2,533m2* land area
•Mixed Use zone (15 storey height^)
•Huge potential for future capital growth and development
Building 12, 2 Flinders Parade, North Lakes, 4509
Fully leased office investment
•1,382m2* NLA building completed in 2015
•46 car parks (ratio of 1:30m2* NLA)
•100% leased with a 2.36 year* WALE
•$633,173* per annum net operating income
•NABERS Rating - Currently an ‘Exception’
•Multi-tenanted building (5 tenants)
•Diverse income stream and defensive cash flow
•Huge potential for future rental growth
•Situated 28 kilometres* north of Brisbane CBD, North Lakes has emerged as the most vital residential, retail and business destination in the region. This new 'Central Business Hub' has attracted long-term investment from multi-national companies, major retailers, government and local business.
Excellent access for trucks and trailers
Unaffected by floods, ensuring peace of mind
The Café -Freshwater Railway Station Kuranda Scenic Rail
RWC Cairns together with Queensland Rail are seeking the best of the best food, beverage and function managers to lease The Café & Function Centre at Freshwater Railway Station. The opportunity includes a fully-equipped commercial kitchen, up to 900 daily passengers and when the train departs space to host a myriad of events. It's more than just a Café, the unique surrounds can whisk you away to a bygone era, but quickly bring you back to a platform full of of visitors all eager to experience our beautiful region. Every space here holds a story.
So how do you get onboard. If you have the right background in hospitality for this once in a lifetime opportunity please call to arrange an inspection. Above all you'll need to bring your passion.
64-68 Neil Street, Toowoomba City, 4350
Strategic CBD development opportunity in Toowoomba
•Four street frontage offering exceptional exposure
•Prime location near Town Hall, Empire Theatre, Eat Street and Grand Central
•Zoning allows for up to 12 storeys^ of development, including motels, apartments and offices
•Proximity to Annand Street council car parks for convenient parking solutions
•Level block of land optimising development potential
•Existing building credits and Toowoomba Regional Council incentives available
•Potential for substantial holding income with the opportunity to increase rental returns
•Option to subdivide into two distinct blocks for flexible development plans
2 Kennedy Road, Bli Bli, 4560
320m2* Veterinary Clinic
Expansive land area of 2,552m2*
Secure lease to March 2027 - options to renew
Tenanted to Bli Bli Veterinary Surgery
Current net income of $79,567 per annum
Outgoings 100% payable by tenant
Annual 3% rent increases
Expressions Of Interest
Closing Friday 25 Oct at 4pm
RWC Northern Corridor Group
raywhitecommercial.com
Abi Rowlands 0402 028 663 abi.rowlands@raywhite.com
Emily Pendleton 0402 435 446 emily.pendleton@raywhite.com
2484 Bruce Highway, Gunalda, 4570
Glamping
lifestyle property situated on 160 acres of pristine pastures
• Caretaker residence with 3 bed and open plan living on top of the hill away from the campers and glampers
• 2 cabins, 4 glamping tents and a trailer glamping tent
• Comprehensive list of inclusions
• 2 sheds, bookings office, bar/cafe, stage, swimming pool with toddler pool
• Off-grid solar systems and generators
• Expansion potential allowing for significant growth through having a state of the art facility to house functions, weddings and major events.
• A well-established business with a strong brand presence and loyal customer base, offering a turnkey opportunity for investors
• Endless potential
Sale Offers over $2,950,000 64.75 hectare
RWC Northern Corridor Group
raywhitecommercial.com
Cory Hoy 0421 004 484 cory.hoy@raywhite.com
Fraser Martin 0423 273 438 fraser.martin@raywhite.com
• Net lettable area - 902m 2
• Large prime 3,223m2 allotment with massive 70m* wide frontage
• Net income estimate of $462,031.92 p.a. + GST
• Long leases with strong annual increases
• 7 Tenants in place
• Prime location in tightly held area
• 41 On site car parks
• CCTV surveillance with app capabilities
• Pylon signage
• Zoned - Centre
• Tenants incl. SPAR Supermarket, Doctors @ Regents Park, Pharmacy, 4Cyte Pathology, Browns Plains Real Estate, Laundromat, Gluten Free 4 U and Hairdresser/Beauty Salon.
Annabel Salcedo 0412 152 799 annabel@rwcs.com.au
Springwood
Bevacqua 0412 784 977
2/139-143
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NSW | ACT
area - 2,782sqm*
10 year lease to 2034 + options to 2054
Income $319,500 pa + GST*
Tenanted by 'Leaping Learners' - award winning operator
Directly opposite Picton Public School (315+ students)
Less than 1km* to Picton Train Station and town centre
SC
panoramic and ocean views
Highly sought after Northern NSW location
Tranquil ambiance - never to be built out Suit master plan community potential 13*min from the Gold Coast, 15*min from Kingscliff R1 General residential zoned
Potential to split tenancies
Glazed shop fronts with high exposure
11 secure underground car spaces
Empty shell ready to personalise your business
Full base building services available
Leased 31 room boarding house in high growth precinct
•31 high quality rooms (10 x double & 21 single room) with lift access
•Land tax exemptions and depreciation benefits available
•Current net passing income of $626,220* per annum with potential to increase
•Close proximity to Western Sydney University, Nepean Hospital & Penrith CBD
•Short drive to the new proposed Western Sydney International Airport
•Moments from St Mary's Village Shopping Centre, St Mary's Train Station and the Future St Marys Metro Station connecting directly to the new Western Sydney International Airport
WA
2,532m
One of Perth’s most iconic sites
Close to new ECU campus (completion 2025)
Adjacent to Perth cultural centre
9,579m2 site with 4 massive street frontages
Potential to build up to circa 100,000m2* (STCA)
Zoning support residential, office, hotel, educational uses
Existing property provides substantial holding income
55 Bellvue Avenue, Papanui, Christchurch, 8053
4,166m2 site behind The Papanui rd shops
Currently occupied by the Papanui RSA and situated behind the shops on Papanui Road, this substantial land holding awaits its next incarnation. An excellent opportunity to either retain for hospitality, convert to a new commercial use or redevelop the site. Advantaged by having 3 access points from Bellvue Avenue, Papanui Road (by ROW) and Harewood Road as well as having a large car park (65). The modern hospitality and office premises of 847m2* sits on a large valuable site of 4,166m2* zoned Commercial Core. A fantastic location just off Papanui Road being close to all the action.
Sale
Tender Closing 3pm Wednesday
16 October 2024 at RWC Christchurch, Level 2, 76 Hereford Street, Christchurch
+64 27 221 4997
paula.raine@raywhite.com
RWC Christchurch Paula Raine
rwcchristchurch.co.nz
837 Jones Road, Rolleston, 7614 Auction
To be held from 11am Thursday 24 October 2024 at RWC Christchurch, Level 2, 76
Hereford Street, Christchurch (unless sold prior)
Investment - solid tenant, practical warehouse
Ideally located on Jones Road in popular Rolleston, the fastest growing district in NZ. This practical 3 bay warehouse/workshop of 270m2* is well leased long term to the Selwyn District Council being a great solid Tenant providing you added peace of mind. Rental returning $41,783pa + GST + outgoings.
Advantaged by having the versatility of 3 roller doors accessing the building and being on its own freehold title (so no body corporate hassles here). The underlying 600m2 of land provides a good security fenced yard area in the front and side, allowing 10 on site car parks. Quality industrial investment properties of this size seldom become available Don’t miss out, act now.
Raine +64 27 221 4997
paula.raine@raywhite.com
RWC Christchurch
rwcchristchurch.co.nz
SA | NT
Breathtaking Bridgestone investment
VIC | TAS
Suites 15&16/8 Tuck Street, Moorabbin, 3189
private Sale
Thursday 17th October 2024 at 4:00pm
• Two offices being sold as one
• Ground floor with direct street frontage (12m*)
•Total building area | 180m2* (90m2* each)
• Separately titled and metered
• Dual entrances (front and rear)
• Direct street parking out the front & ample private parking on-site
• Featuring kitchen facilities & heating / cooling
• Located just off Nepean Hwy and South Road
• 300m* to Moorabbin Train Station
• Zoning - ACZ - Activity Centre Zone
Ryan Amler 0401 971 622
ryan.amler@raywhite.com
Jonathan On 0479 003 122 jonathan.on@raywhite.com
RWC Oakleigh
raywhitecommercial.com
162A Carlisle Street, St Kilda, 3182
• Total building area | 90m2
• Single level with street frontage
•Long term and established business since 2007
• 3 + 3 + 3 year lease commenced 15/6/2023
• Current income | $50,790.84 plus GST plus Outgoings
• 450m* to Balaclava Train Station
• Located just off St Kilda Road opposite St Kilda Town Hall
On 0479 003 122 jonathan.on@raywhite.com
167/266 Osborne Avenue, Clayton South, 3169
Dual access container high warehouse
• Total building area | 290m2
• 2
• 2
•Dual motorised container high roller doors
• Current rental $48,672 p/a net*
• • •
•Easy access to major arterials
Thursday October 10, 2024 at 12:00 pm On-site and Online
RWC Oakleigh
raywhitecommercial.com
George Kelepouris 0425 798 677 george.kelepouris@raywhite.com
Jonathan On 0479 003 122 jonathan.on@raywhite.com
270 Warrigal Road, Cheltenham, 3192
•Total land area | 187m2
• Total building area | 90m2
• Current rental | $29,400p/a net*
•Current tenant on a month to month tenancy
• Long standing bakery, for 10 plus years
• Rear access and parking via R.O.W.
• Commercial 1 Zone (C1Z)
• Excellent exposure to Warrigal Road
• • Council parking directly at front
Wednesday October 16, 2024 at 11:30 am On-site
RWC Oakleigh
George Kelepouris 0425 798 677 george.kelepouris@raywhite.com
Anthony Anastopoulos 0488 095 057 anthony.anastopoulos@raywhite.com
