Rising Rates Offer a Positive for Commercial Landlords

March 1 2023

Commercial property owners have an opportunity to reposition assets to attract higher incomes as the economy rebounds from Covid and the impacts of rising interest rates.
Rising Rates Offer a Positive for Commercial Landlords

Factoring interest rate rises into the equation this year it’s realistic to foresee inevitable flow-on effects for commercial property – but the news isn’t all grim.

When you dig beyond the rise in yield expectations from investors, which ultimately reduces the price point on tenanted investment properties, there are positives.

Rental income is expected to increase in the short to medium term as the economy continues to rebound from the pandemic and the market flushes out the hang over that was caused by the restrictions on trading and the rental abatements that were given.

Reduced vacancy rates that stimulate competition will be the main driver in increased rentals, along with current long-term leases which have rents that are reviewed against the Consumer Price Index.

With the increased population and density around major commercial and retail precincts, commercial property owners have an opportunity to reposition assets and maximise income. To this end, qualifying tenants is even more crucial as is getting the mix of tenants right. Look for value-add opportunities within existing properties to attract high quality tenants with long term and sustainable business models.

It’s also pertinent to identify zoning changes within the draft town plan so that you, or your property manager, can structure leases to allow for any potential development upside in future planning schemes.

Kollosche’s experienced commercial team can advise you on the best strategy to optimise the value of your asset, and improve yields, as we navigate this challenging cycle.

Noteworthy Sales Results

A freehold retail building in the centre of Southport’s Chinatown precinct attracted a frenzy of bidding when the property went up for auction last week.

Kollosche Commercial sales agents Adam Grbcic and Tony Grbcic led a four-week marketing campaign that attracted 93 enquiries and three offers prior to last Wednesday’s auction held at Kollosche’s Broadbeach headquarters.

Eight bidders registered for a tilt at the 146m2 restaurant space at 8-10 Davenport Street with a remarkable 88 bids placed before the hammer went down to a local buyer at $1,385,000.

A large rural lot with sub-division potential at 1 Crane Street in Nerang sold for a premium price of $2,480,000 following a five-week expression of interest campaign, which attracted 112 enquiries and a total of 9 offers at the conclusion of the process.

Kollsoche’s Commercial and Residential sales divisions created competitive tension between two key buyer pools – hobby farmers and developers – to achieve the best result for the vendors.

Leasing and Property Management News

A solar power installation company has taken a five-year lease at a rate of $122,000 per annum on a 280m2 A-Grade office space at 2/47 Watts Drive, Varsity Lakes.

The leasing team fielded 24 enquiries for an 83m2 retail space at the base of the Solaire Building on the corner of Cypress Avenue and Ferny Avenue, Surfers Paradise. A convenience store retailer has signed on for a five-year lease at $60,000 plus outgoings per annum.

A strategic marketing and sales plan is the key to achieving the best possible outcome as the market continues to evolve. Reach out to Kollosche Commercial for advice based on experience, local market knowledge and collaboration.

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