Rate cut reignites sector
THE Reserve Bank's cut of 50 basis points is a much-needed kick-start for the property sector as investors look to transfer cash back to higher-yielding bricks-and-mortar from the volatile sharemarket.
THE Reserve Bank's cut of 50 basis points is a much-needed kick-start for the property sector as investors look to transfer cash back to higher-yielding bricks-and-mortar from the volatile sharemarket.Although its not expected to be a stampede, as not all of the trading banks have passed on the full amount to the customers, agents say it will keep the market buoyant in the last two months of the 2011-12 financial year.Asian-based investors remain the key buyers that are competing with Australian self-managed superannuation funds, particularly in the $5 million to $20 million price range.Different types of assets are also being snapped up, from restaurants and bars to smaller freehold office towers and strata units.A resurgence of interest has also occurred at the western end of Sydney's central business district, as companies prepare for the opening, in a few years' time, of the Barangaroo project.Of the latest sites to be offered is the premises underneath the former Burns, Philp & Co building at 5-11 Bridge Street. It is 702 square metres and leased to the Fratelli Fresh provedore, Cafe Sopra, and a wine bar.The lease is for 10 years with a 15-year option and, already, queues of eager patrons are seen down Bridge Street.The property is being sold by a private syndicate.The selling agents - the managing director of City Commercial, Warren Duncan, and the business's director, Miron Solomons - said high demand for this style of asset, especially with A-grade food-use tenants such as Fratelli, has seen yields sharpen significantly.Mr Duncan said the drop in rates would be the necessary impetus to get sales moving after what has been a quiet start to the year.Mr Solomons said investors were confident in both the tenants and their ability to service rents, longevity and their own capital contribution towards fitting out these venues."These actions ultimately add hundreds of thousands of dollars in value to these assets," he said. "Underutilised for years, these types of spaces dotted around the CBD are now in hot demand from investors, especially those that have valuable liquor licenses."Mr Solomons said the revitalisation of the Sydney small-bar scene had also attracted investors to these more "quirky" assets.Another site on the market is at 60 Clarence Street, which is being sold by a private Asian family through Mr Duncan and the associate director (city sales) for CBRE, Rohan Ramsay, and the director of international investments, Rick Butler.The seven-storey site was renovated in 2009 and had a new addition attached to the heritage facade when it was the John Sands Building. Mr Ramsay said it would be worth up to $20 million and was in the prime location of the western corridor that will benefit from Barangaroo."The cut in interest rates will be a boom for the smaller end of the office market as clients are wanting to take cash from the volatile sharemarket and buy properties with high rents and long-term tenants," Mr Ramsay said."Inquiries are rising from small super funds and private syndicates, as well as Asian investors who are drawn to this style of assets."Mr Duncan added that he expected interest would also come from interstate and overseas buyers who are showing more confidence in the outlook for the Sydney CBD office sector.