“While the commercial property sector has been slow to rebound from the troubled financial times of last year, and a full recovery is anticipated to occur between 2011 and 2015, the addition of 316,635 square metres of office space has helped spur interest and activity,” Mr Ellis said.
“At the same time, banks are showing more confidence in approving loans for commercial property purchases, a sure sign the Australian economy is further strengthening.”
Mr Ellis said the network had undertaken a survey of its commercial property managers recently, with respondents saying many investors realised commercial property may be more attractive than residential, as it can offer much better returns, is relatively hassle-free and tenants are usually on long term leases of three or more years.
“Yields can start at around six per cent, which is much higher than what you might currently expect from a residential investment, despite the emerging recovery evident in the residential sector” Mr Ellis said.
“Plus, it is tenants, not the landlord, that bear the cost of many of the outgoings such as council rates and maintenance.”
Mr Ellis said that according to the survey, current levels of return ranged between 5.6 and 9.5 per cent, with 21 per cent indicating returns were around 8 per cent.
“For the majority of members responding to the survey, around 61 per cent, this was a decrease over the previous 12 months, however 57 per cent expected returns to increase in the coming 12 months.
“Around 92 per cent of survey respondents also said they expected rental values to increase in the next 12 months, and vacancy rates were expected to decrease for almost 70 per cent of respondents, easing the supply situation to some degree.”
In the last 12 months, 44 per cent of respondents said rents had increased, 33 per cent said they had remained the same and 22 per cent said they had decreased. Vacancy rates had increased for almost 65 per cent of respondents.
The majority of rental movements were between 1 and 5 per cent.
Based on survey responses, the major factor influencing demand for office space remains position, followed by transport access, exposure and then energy efficiency, which is increasingly playing a role in the decision making process.
Issued by: First National Real Estate
For further information contact Karen Panna, National Commercial Manager, First National Real Estate on (03) 9418 9137 or 0466 771 038