A solid investment

SAITeysMcMahon head of property Graham Brewer says direct property investment is looking “exceptionally good”.

“The fundamentals of direct property are strengthening and the weight of money chasing property is becoming significant,” he says.

This is largely being driven by the superannuation sector, which is continually searching for assets.

Another factor in driving prices up in commercial property is disgruntled purchasers who have been outbid on their last deal. Again, they have the funds and are desperate to secure a property.

“Markets are experiencing strong investor interest fuelled by the weight of money looking for quality investment, and underpinned by the improving fundamentals in those markets,” he says.

“The very nature of tight market fundamentals, high construction costs and an upswing in effective rentals means investment returns are more than likely to fuel further investor interest in the office sector going forward — which bodes very well for those who have got set.”

Brewer says successful investing in these markets involves finding assets that still have some value and long leases.

It can also involve moving into niche markets such as childcare centres.

“It is finding these types of assets that will deliver out-performance,” he says.

“It is not traditional office markets in places such as Canberra or Sydney, which means you have to be very selective.”

Brewer says this means property managers are looking more at Adelaide, Brisbane and Perth for opportunities as existing buildings and vacancies will not justify any new supply.

“Sydney will justify new supply soon, which could create oversupply in the market,” Brewer says. “But the weight of money is driving prices up and that is leading direct property investments to out-perform.”