MJM Property Group

February 2005 Issue
Market Trends: News from the Commercial Market
MJM Property seeks fashionable address for fashion client
Some 2005 Property Predictions for the Residential Market
Property Market outlook for 2005 - Australian Property Institute Seminar

Market Trends: News from the Commercial Market

Two recent client appointments illustrate the emerging role that small advisory firms such as ours are playing in the world of commercial and industrial real estate.

The owners of 83 – 85 Chandos Street, St.Leonards have appointed MJM as the vendor's representative in the sale process of this under-rented prime investment property. The 1,000m2 office building is located in the heart of this prime North Shore commercial precinct and has approval for strata title subdivision.

The asking price of $3.2m is extremely reasonable taking into account the under rented nature of the income stream and the potential for value-adding via a full refurbishment program when the leases expire in the middle of 2006. In the meantime the buyer is assured of a net return of more than 7%.

MJM’s role is not only to physically sell the property but work with (rather than in competition with) the various active commercial selling agents in the area.

Many investors are too busy to keep a day-to-day focus on the promotion of their property and the idea of outsourcing this function made perfect sense to the vendors.

MJM Property seeks fashionable address for fashion client

Meanwhile, on the other side of the Harbour, MJM is acting for a well established Surry Hills fashion house Nuovo Uno, researching and leasing new office premises on the city fringe.

The client brief was to research the market and compile a comprehensive list of 'trendy' options in areas such as Ultimo, Pyrmont, Chippendale, East Sydney and Surry Hills. After compiling a market report, MJM arranged inspections at a wide cross-section of potential buildings.

After initially agreeing terms on a property in Glebe the lessees have now signed Heads of Agreement on two floors of a prime Surry Hills property known as 351 Crown Street.

Nuovo Uno’s Harvey Boots stated, “The whole relocation process was intimidating and it was great that we had an experienced professional like Michael to do all the leg work, provide strategic advice and more importantly to assist in the lease negotiations”.

“It was a tremendous learning experience and I would suggest any potential buyer or lessee of a business property uses an independent consultant where needed,” said Mr Boots.

Some 2005 Property Predictions for the Residential Market

1. New development approvals and construction activity will continue to fall, albeit at a relatively slow pace.

2. The home renovation sector will remain active but slightly subdued.

3. The residential investment market will continue to 'take a breather' despite a predicted fall in vacancy rates and a rise in rental rates.

4. Owner-occupier housing finance will recover slowly after a disastrous 2004.

5. Slow population growth in NSW and extremely high debt levels will combine to make 2005 and possibility 2006 slow years overall.

Property Market outlook for 2005 - Australian Property Institute Seminar

15 February saw MJM attend an excellent property outlook briefing at the Westin Hotel in Sydney. The mix of speakers included Dr Chris Caton, the Chief Economist at BT Financial Group, who predicts interest rates may increase by 0.25% in March 2005 with a possible 0.25% further increase in April 2005. This was the worst-case scenario and he believed that these increases would put the Reserve Bank sufficiently at-ease.

The RBA reasons that if unemployment continues to fall, wage price inflation may follow, which may drive the CPI over the 3% target set by the RBA. Accordingly, a couple of swift but minor rate increases will assist in keeping inflation in check.

Our next newsletter will compare this prediction with the actual events of the next two months… stay tuned.