Monthly Archives: May 2016

187 Todd Road, Port Melbourne – May 2016

The Port Melbourne investment market continues to be tightly held. Major works continue in the immediate vicinity with the massive extension of Web Dock well underway.

The GMH site opposite our building remains in exclusive due diligence with Goodman Group. They are planning a major commercial/industrial development on this strategic land holding. Closer to the CBD, construction has commenced at a number of residential development sites. The new Planning Minister is still reviewing the Fisherman’s Bend planning controls so no new permits are being approved pending the outcome of the review.

There have been a number of sales of permitted sites in Fisherman’s Bend with Little Property recently selling a site in Lorimer Street for $60m. The site had approval for 940 apartments in two towers and was purchased by a Shanghai based developer. It is this buyer’s first acquisition in Australia.

There continues to be a lot of infrastructure spending in the area with major intersection/road upgrades at Todd Road where it connects with the Westgate Freeway.

Leasing

In our last update, we informed investors of a pending leasing of the balance of space on level 2. We are pleased to advise that leases have been signed with K Line for a term of 7 years. K Line is moving out of another Terraplex asset 570 St Kilda Road and this move was facilitated and negotiated by management. K Line initially appointed a tenant representative to review their accommodation needs. After focussing on a couple of options, we were able to negotiate a suitable new leasing deal for both parties.

Emirates Leisure Retail (operator of the Hudson’s Coffee business) moved into their new offices in February and a new Hudson’s Coffee Cart commenced operations in the foyer in March. It has been an excellent addition to our building. As part of our ongoing capital improvement program, we have re-tiled the walkway to the entrance and added a wooden deck to the right hand side of the main entrance. Hudson’s Coffee will be using this area for outdoor seating.

The building is now fully leased for the first time since our acquisition back in May 2014. More importantly, our list of occupants is first class and the WALE (weighted average lease expiry) is an attractive 5.5 years.

Fisherman’s Bend update

The Fisherman’s Bend precinct was formally adopted by the previous Liberal State Government. Since Labour came into power, they have reviewed the precinct and recently made some significant changes to the boundary. Our building is now included (which is very positive) and we are seeking advice as to how this will impact 187 Todd Road. This is one of the largest urban renewal projects in Australia, which will significantly transform this area over the next 30-50 years.

Recent Sales

Port Melbourne continues to be a tightly held market. There are no recent comparable sales to report.

Real Estate Fundamentals are Strong – Tim Church UBS, Head of Real Estate Australasia

1) Interest rates and the A$ have been supportive for Real Estate Valuations

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2) And the outlook remain “lower for longer”

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Appendix 2 – Hudson Coffee Fitout

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By | May 23rd, 2016|Uncategorized|0 Comments

570 St Kilda Road, Melbourne – May 2016

The supply of office space in the St Kilda Road office market has shrunk by almost 20% from its peak in 1992. In the last 6 months, over 15,000m2 of space has been withdrawn for residential redevelopment alone which is equivalent to two buildings the size of 570 St Kilda Road. Virtually no new office construction has occurred in the last 25 years to compensate for the withdrawal. Due to the diminishing supply and consistent demand, the vacancy rate in St Kilda Road is forecast to fall to 15 year lows in the next 18 months. Office rents have continued to grow and importantly incentives have fallen, the net effect being very positive to building owners in St Kilda Road. Investment yields have compressed over the last 12 months and are predicted to firm further due to the “low for longer” interest rate cycle we find ourselves in.

The confirmation of construction of the new Domain rail station will be a big boost for the precinct. With Melbourne projected to be Australia’s largest city by 2030 and the growing momentum by people preferring to live closer to places of work, buildings like 570 St Kilda Road will continue to be eagerly sought by investors.

 

By | May 23rd, 2016|Uncategorized|0 Comments

658 Church St, Richmond – May 2016

The city fringe office market continues to perform very well from a leasing and sales perspective. There has been six years of positive net absorption of office space and continued steady employment growth which augurs well for the inner suburban office markets. Major companies are focussed on attracting and keeping quality staff and this has resulted in a move to vibrant, well public transported suburbs like Richmond.

With no new office supply and the CBD office vacancy rate predicted to decrease further, city fringe office rents are predicted to increase with prime properties anticipated to outperform.

MARKET UPDATE

The investment market has started the year on a very strong note. Frasers (previously Australand) has sold Building 10 in the Richmond Corporate Park to an overseas investor BlackRock for $45.5m.The sale price reflected a tight yield of 7.21% and a capital value of $5,761/m2. This is the largest office investment sale in Richmond for over 12 months. It is situated in an inferior location to our buildings.

 

The leasing market continues to be very strong with limited supply in the Richmond/Cremorne precinct. Bauer Media recently leased 823m2 for 5 years on the ground floor of Building 8 in the estate. The rental rate was $365/m2 with a low incentive of 12% which is excellent news for our building.

Real Estate Fundamentals are Strong – Tim Church UBS, Head of Real Estate Australasia

1) Interest rates and the A$ have been supportive for Real Estate Valuations

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2) And the outlook remain “lower for longer”

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3) Real estate remains one of the highest yield asset classes

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4) While volatility is the new normal in global equity and commodity markets the relatively stable real estate has been the beneficiary of the flight to safe asset classes

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5) Over the next 20 years, a further A$380 billion of demand for real estate investments will come from Australian superannuation

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By | May 1st, 2016|Uncategorized|1 Comment