Low Interest Rates, High Rents Make Buying Offices A Smart Move

Low Interest Rates, High Rents Make Buying Offices A Smart Move

The Age
7 July 2006
MICHELLE DRAPER

BUSINESSES are shunning spiralling rents and taking advantage of low interest rates to buy in Melbourne's buoyant strata office market, agents say.

It is now feasible for small to medium businesses to buy a strata office unit and pay the same in loan repayments a year as they would in rent.

Colliers International's Pat Burke and Mark Wizel said steady interest rates and rising CBD and suburban rents had persuaded many businesses to consider buying an office.

Mr Wizel said traditional office tenants often used their private superannuation funds to buy offices. He said the benefits included strong depreciation allowances, scope for capital growth and the ability for businesses to control their property.

In a sign rents will continue to rise, Mr Burke said CBD strata office projects, including Normanby Chambers at 430 Little Collins Street and Signature Workplaces at Waterfront City, recently achieved rates in excess of $6000 a square metre.

He said the market for whole floors continued to be strong. Recent sales at 530 Lonsdale Street and 171 Latrobe Street achieved $3110 a square metre.

Knight Frank's suburban office leasing director Ian Treloar said leasing costs on a standard 100 sq m strata office unit had increased 50 per cent over the past three years, from about $20,000 a year to $30,000.

He said it was possible to buy a $350,000 strata office for the same cost of a year's rent.

"For the same cost, companies could have an investment property with all the tax benefits," he said. "That's why this market has been buoyed in the last three years. People that were renters before, all of sudden become potential purchasers. It's better to buy than rent."

CB Richard Ellis recently appointed Danielle Ashworth to head a new Victorian division focused exclusively on strata office sales.

Ms Ashworth said several developers were looking at existing sites in the CBD, originally slated for residential developments, with plans to incorporate retail, strata offices and apartments.

"If developers are looking along those lines, then it's definitely a market that's moving," she said.

The move to appoint a dedicated strata office development manager comes two years after CB Richard Ellis' Sydney office launched its strata office division.

Director Gavin Lloyd said Sydney buyers were interested in the Melbourne market because of few opportunities in the NSW capital. "It's near impossible to really deliver a new project in Sydney at the moment," he said. "Several of our Sydney-based clients have already acquired buildings in Melbourne for strata conversion."

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