All Topics / Creative Investing / commercial property

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  • Profile photo of rollytrollyt
    Join Date: 2004
    Post Count: 2

    looking at purchasing a commercial property at 480 Collins Melbourne.

    The cost of the office suite is $261200
    Depreciation(year1) $4948
    Net Rent $15672
    Size of Suite 32sq/mtrs plus 9sq/mtr balcony
    Tenant: Collins street Tower Business Centre

    Office Suites are already leased and offer you a 6% NET annual return – with 3% pa increases, and 3-yearly market reviews.

    since i live in NSW country and I don’t know Melbourne i was wondering if some of you Guru’s can tell me if this is a good investment or not?
    is it a building that you can negotiate on price?
    is there capital growth in this building?
    what cycle of the commercial property are we in?
    how do rental per square metre compare to other commercial property in the area?
    and other answer will be helpful in making my decision

    Regards Rolly


    Profile photo of Fast LaneFast Lane
    Join Date: 2004
    Post Count: 527

    The only exposure to Collins St property I have is every year when BRW send out their annual Rich 200 list magazine and I read about some octogenarian squillionaire who owns this tower and that tower on the street.

    The thing that stood out for me is the balcony is almost 25% of the property area. Anyway, Collins St. is the bluest of blue chip property you could probably get in Australia, so in that regard it is a good place to invest.

    However, what someone seems to have done is cut up a chunk of office building, divide it into offices and flog it off as retail investment packages whose returns aren’t that attractive despite the address.

    I believe that you can do far better with your money, if you’re after an office suite investment, in an area that has as good demand as has this one. But if you had your heart set on this particular investment at those prices, even given the address, I think the marketeer has built in a bit of negotiating room into the price.

    Hope this helps…FL

    Fast Lane- The poster formerly known as g7

    Profile photo of mathewc73mathewc73
    Join Date: 2005
    Post Count: 241

    Each building on Collins is different so to know if you are over or under the average $$ per sqm you should try and contact a few of the tenants. There is not much point comparing to other buildings as each is unique and offers different services, etc to their tenants.

    How from NSW? Find out who the building manager is. They usually know what agents are working the building and who owns vs who rents. The building manager can be found by contacting the body corporate.

    I would also ask the building manager what the building is like to manage? Are there difficult tenants? Legal issues? Silly bickering? etc.

    Collins street is a very good street to invest in. However like all long streets there are good and bad buildings. Some very large businesses are moving to the docklands which will make a dent in Melb. So I would find out the business mix, future plans of your lessee as well as vacancy.

    The good buildings will have little to no vacancy.

    Good luck!


    Profile photo of Yidn_Shalom25Yidn_Shalom25
    Join Date: 2005
    Post Count: 43

    As odd as this sounds to some, I would never buy a tenanted CIP. I just believe there is not enough room to maximize income-thus the captalized worth of the property. I view investing in vacant CIPs as buying wholesale, because the market views it as having no inherent value other then the land and building replacement cost considerations; they are more focused on the usages of it. It is therefore my contention that all one has to do is find a high income tenant and you have immediately transformed a wholesale CIP into a retail.

    nice to be back :)

    Profile photo of DazzlingDazzling
    Join Date: 2005
    Post Count: 1,150
    all one has to do is find a high income tenant

    Absolutely 100% correct…..however, that is far easier said than done. Negotiating a high yielding long term lease is pretty onerous, especially with a tenant who is actually going to look after your investment and treat it like a serious place of business.

    Profile photo of G3ipdG3ipd
    Join Date: 2003
    Post Count: 7

    Our thoughts on the Collin Street commercial property deal are that it’s not much better than what you could get with the bank. There are better deals out there if your after a good long term investment for example we found a small one in Narooma, NSW.

    After negotiating a new lease with the previous owner for 12 years and we now have it back on the market at a 9% net yield with the first 3 years rent paid in advance. We were able to manufacture this deal because after investigation we found that the owner of the property needed cash quickly but wanted to keep running his business from the premises.

    The real estate agent failed to advertise the fact that the vendor wanted to lease back the property…it took a while but now we are able to on sell the property with a new 12 year lease in place at a great return for an investor and still pick up a nice little earner for us creating a win win win.

    We are also just about to finalise a deal with a holden dealership in a country town who is in a bad position and wants to move to new premises. This we may have to buy two buildings to get this deal together but again we have found underlying problem that needs to be solved by talking to the tenants/vendors directly not the agent.


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