Commercial Property Cycle Clock for different Capital cities

Hey friends on PC, I have been investing in residential property for the last 10 years, but I want to tip my toe in commercial property for my next investment(could be for SMSF). In the past, one the most important factor in deciding for me to decide where to buy will be depending on the property cycle.

For residential in different cities, in my view:

• Sydney is at 11-12 clock (Too much risk)
• Melbourne is at 10-11 clock (Doable, but too little yield)
• Brisbane, Canberra and Adelaide is at 7-9 clock (Sweet spot)
• Perth is at 3-6 clock (has to wait for it to bottom out and more positive indicators)

Since I am newbie in this area, please share your thoughts on what you think are property cycle clock for commercial properties in different capital cities?

 

Does Commercial Proeprty run to the same kind of clock to resi? My impression is that it doesn't but I could be wrong. Also, does it matter?

What does this mean for the commercial property investor?

I believe that really does not matter where we are on the property clock to find a good deal.

After all it’s really impossible to predict exactly where we are on the clock at any given time and usually only you will know after a year or so after the bottom or top ,that was actually the bottom or the top of the market.

If you’re an investor that is waiting for the perfect time to buy – you will probably never buy.

When I started my investment career in the early 1980s I decided that it was not a good idea to focus on the “noise” in the market.

To me the best way to find a good investment was to focus on the fundamentals ,the numbers and potential upsides.
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Commercial Property and The “Property Clock” | James Dawson Property

 

Thanks for the reply , since I am not sure hence the question, but they should all have some sort of cycle right? Does commercial investors behave different to residential buyers?
surely when there is competition, there will be human emotions such as FOMO and therefore speculation will be in play there hoping that the rent will go up fast or future rezoning. ​

 

Don't know. From what I know about commercial, I doubt that CIP investors carry on like resi investors do. CIP prices seem to stay relatively stable and don't seem to boom or bust.

@DaveM, @Ross Forrester or @Beano know a lot more about this than I do.

 

Sadly I have seen commercial guys behave in a range of ways typical of human behaviour. Euphoria, desperation, panic and greed all rolled intogether.

West Perth literally had a moment in time when not one piece of office space was available for rent. I think the Property Council have said it is around 18% now.

We lease office space in our business. We had the stupid landlord at one time ask us for $650/sqm (they never got that) and they leased some space next door for $250 the other day.

 

I stand corrected!

 

Isn't this what they invented google, Siri and wfg?

 

I have seen comm and resi investors act like children, and same act like ice queens. Its not so much the product but how you approach it

 

Some Prima Donnas and others just queens (ice optional).

 

I can't recall if I read from PC or somewhere near some commercial investments now have very low yield because of all the cheap money that people can borrow in the last few years, very much like residential investments.

With APRA cracking down on loans, I would have thought the commercial interest rates would rise as well, although I'm not sure. Should we be expecting some correction/softening to commercial sector at some stage? This is just a generalised view, I do agree that it may depend on location, type of use, etc.

 

The question is whether commercial property follows the same boom/bust cycle as residential. I really don't think it does.

 

i know someone who was getting $750/m2 + 700/bay for each of a few floors he owned in cbd, his tenant then went and spent a fairly significant sum fitting out a pretty high quality and flexible space, now that same space can be leased around the $250 or so mark once incentives accounted for, for the right tenant and the carbays are significantly cheaper too.

thats a massive haircut
a close friend just went from paying around $220-240k in rent the last 3 or 4 years post his rent free period running out, to paying 90k or so. thats an immediate $10k a month saving, or the equivalent of an extra 50k a month of revenue without the headache, if the business was running on 20% margins|

for many people and businesses at the moment it is a pretty exciting time in perth as it hasnt been this cheap to get office space and then the trades to fit it out, hasnt been this easy to find good staff, hasnt been this easy for said good staff to find decent accommodation close and convenient to where they want/need to be and for a decent % of the population who might form part of the potential workforce or customer base of said businesses, for quite a long time, imo well over a decade.

yes perth has its challenges but imo the biggest one has been confidence, and i believe we're starting to see improvements in sentiment and therefore action as more and more people are realising that theyre doing better than they expected and the sky hasnt fallen in,

 

I don't know so much in terms of being a good time in Perth to buy CIP? returns are not great, risk is high, oversupply??

My uncle holds 6 CIP in Perth and he mentioned one of his tenants left in October last year he has not yet been able to secure a tenant, has dropped the rent.

 

I've seen a distinct lack of interest previously too. Over 18 months in Sydney. Rent was not the issue.

The building has since been leased twice without a lost day.

Meeting the market is but one consideration only.

 

I was saying that it's a great time for existing tenants and people looking to start businesses due to how cheap commercial rentals are. That being said, i do believe a lot of the desirable smaller quality spaces are getting a bit more scarce compared to say a year ago and a lot of what is contributing to the high vacancy rates for say offices in cbd/west Perth are less desirable spaces and like most property markets it's important to look at the markets within the markets to get a better picture

Certainly the change in the market vs boom has opened up different opportunities and methods of securing places and with some creative thinking and planning it's possible to end up significantly better off financially than current without doing much

 

how far has the price dropped in general for commercial properties in Perth, is there any stats or index ?