While much of the focus has been on residential property values in central Sydney over the past year, the demand for strata office investments has led to a significant surge in values for the city’s commercial spaces. Ray White Commercial figures from September show a 33% increase in capital values in the CBD over the past year, up from 22.1% the previous year and compared to around 11% in the residential market. The average capital value within the Core precinct is now $11,711 per square metre, with the Midtown average at $8,955 per square metre.
What’s causing this value growth?
Put simply, a larger number of would-be investors are leading to high demand for limited space. Sales transactions in the CBD are currently under $40 million, which won’t come close to last year’s $154 million by the end of the year.
High employment growth and competition have helped to drive up rental yields (with prime assets averaging 4.85% and secondary assets 6.50%) in the city centre, which has in turn encouraged more central business owners to try and invest rather than lease. It’s good news for investors with the office vacancy rate hovering around 5.9%, however those strong rents could lead to potential uncertainty as more tenants are priced out of the market.
One option for investors may be to consider providing temporary or coworking spaces as tenants search for smaller and shared spaces to operate from in the city centre. Another worthwhile idea is to streamline and improve the upkeep of existing assets with a strata management review.
The importance of effective strata management
Inefficient commercial strata management can lead to unnecessary fees, under-maintained properties and a substandard quality of building services including cleaners and security staff. These factors could affect the perception of your property to potential tenants and ultimately affect your returns as an investor, which is why it’s so important to review your strata management services regularly.
Could you be paying too much for insurance, services and management for an inferior result? While it’s worth paying more for a quality strata management service, it’s vital to recognise if you and other investors are being taken for a ride with little to show for it. Your strata manager should be transparent, proactive and communicative with you and the other owners within the strata scheme – otherwise it’s time to make a change. Jamesons Strata Management provides commercial strata management from our offices in
Mosman, Surry Hills and Hornsby as well as Wollongong and Bowral. Contact us at your local branch or on 02 8969 3300.