Elizabeth Quays – PropertyESP

Would you invest $100 into WA’s future?

So at PropertyESP we are big fans of infrastructure and especially have been advocating that Metronet becomes a key priority with the newly elected Labor Government.

However contrary to our views, a number of developers have been reticent to endorse Metronet as they believe the development sector will be the ones forced to contribute with the value capture model.

Always focused on solutions, Samantha Reece Director of PropertyESP invited John Del Dosso from Colliers to present at the Property Council Residential Committee about other options that were also available to fast track Metronet.

John advised the Committee that if the Government was to charge a $100 levy/household per year they would raise $72 million. If that same levy was placed on commercial businesses then this would add another $72 million per annum. If you were to consider this as a perpetuating levy than in 5 years the Government would have raised over $600 million.

This is the exact model that Jeff Kennett applied in Victoria and as a result leap frogged that state into a growth phase (http://www.theage.com.au/victoria/regrets-only-a-few-20120928-26qme.html).

John went on further to recommend that a toll be placed on the Northern Freeway – which at the moment is one of the fastest growing corridors. His reasoning was that the businesses travelling to work in this locale would be the ones paying the toll and residents – wishing to avoid this fee – would be more likely to catch the train (which would mean that this transport system may in fact become sustainable).

Samantha thought that this was a brilliant concept – despite being somewhat radical.

But when she raised it with other colleagues, their first reaction was to state that they didn’t think they should be forced to donate $100 so that Ellenbrook could get the train.

This led Samantha to think – just when would we as ratepayers, start to believe and hence invest in our own state?

This “What’s in it for me” mentality is in fact preventing us as a State to bloom – but at the end of the day $2/ week is very little to give up, in order to gain so much.

Perth is definitely in a precarious position – destined to grow with the most recent infrastructure which has been created – but also facing potential failure if our mindset is not right.

What do you think – would you invest $100 a year to help Perth’s transport network grow?

PS the good news is that Mark McGowan announced the Federal financing commitment for Metronet in today’s press (http://www.perthnow.com.au/news/western-australia/23-billion-jobs-boost-for-wa/news-story/b53b044c6aa3848a4c809169a1ea7645)

Grass shoots for CBD office

Samantha Reece of PropertyESP attended the Property Council’s Office Breakfast for 2017 this week.

It was pleasing to note that the statistics and panellists were united in their views on the future for Perth’s CBD office vacancy rates.

While the overall vacancy rate is relatively high, in January the CBD showed its first positive sign of recovery in five years.

And while the current market has been touted as one of the worst, we were reminded that in the 1990s the office space vacancy peaked at 31%, considerably worse than the current 22.5% vacancy rate.

While the CBD is showing promising signs, the West Perth market in contrast is still experiencing some challenges with the vacancy rates growing by 3.1% since June 2016.

What is more interesting though is that the vacancy rates are worse for B, C and D grade properties, with vacancy rates peaking as high as 37.5%. What we are seeing is a flight to quality as companies are able to secure Premium and A Grade at highly competitive prices.

The panellists also made it quite clear that now was the time to strike any deals for office leasing.

With major mining companies now removing their sublets from the market (30% reduction), the CBD is beginning to see a retraction in vacancy rates and a sense of optimism.

Predictions are that the vacancy rates will be at 17.6% in the CBD by 2020 with only one more building to come to market in the next four years.

There is a sense that by 2021 Prime office vacancy will be at 13.8% while secondary stock will be more like 23.6%.

With 20 major office refurbishments already in the pipeline and the proposed World Trade Centre, the face of Perth is about to undergo a transformation which will shape our City for the next 15-20 years.

And while mining has come off the boil somewhat, the CBD is now becoming the preferred location for second tier mining companies, legal and accounting firms who are relocating from the suburbs and, alas, West Perth.

There was a concession as well that the core investment that the State Government has made over the last 5-6 years with Elizabeth Quay, Waterbank and Northbridge Link, has set the City up for expansion in all these directions.

Perth is evolving and is now home to global companies such as Woodside, BHP, Wesfarmers and the soon World Trade Centre – and that is a fabulous advancement!

We keep talking about an era of disruption and we have certainly witnessed that on the global political level. In regards to Perth, now is definitely the time to hang on, but also to think outside the box.

Old office will undergo upgrades, there will be an influx of workers into the CBD and perhaps West Perth will become more residential based?

Regardless – now is the ideal time for action!

2016 in review – commentary from Managing Director Samantha Reece

Well true to its predictions, 2016 did show some green shoots in Perth’s property recovery.

I remember hosting the 2016 Property Council Outlook lunch in February, where experts such as Paige Walker and Lloyd Jenkins stated that they felt that we had hit the bottom of the market and we were in a period of stabilisation.

And since then we have had these claims reconfirmed by the likes of Warwick Hemsley and REIWA President Hayden Groves.

As Lloyd also predicted, education has come to the fore with Curtin University’s plans to house 20,000 students in its own dedicated city well under way.

And the hospitality and retail sectors are also now playing a more pronounced role in the state’s economy.

The construction of 5 star hotels such as the Ritz Carlton, the 50,000sqm expansion of Carousel Shopping Centre and the $250 million Kings Square redevelopment all spell positive outcomes for Perth.

Add to this the construction of Perth Stadium, the Swan River Pedestrian Bridge and the train line to Perth Airport and on to Forrestfield, and I am beginning to wonder what else we need to see to demonstrate that Perth is far from faltering.

We have several precincts also undergoing revitalisation including Scarborough, Canning Bridge, Murdoch and Canning City Centre which will densify the CBD ring and apartment living.

When you consider all these developments, it is quite evident that Perth is going through a period of disruption and, despite what some may protest, this is a good thing.

At PropertyESP, we have seen some areas such as Fremantle, Scarborough and The Springs hold their own and even grow in property value over the past five years. And where there are improvements to infrastructure, our research shows that there are positive flow on effects to property values.

And as we stare ahead to 2017 we can expect to see some interesting twists, with of course the State Election in March. Any change in government will be followed by a period of adjustment, with major projects in the pipeline of works, the legacy of the Barnett Government will continue for several years yet regardless of the election outcome.

Despite what faction you may favour, it is clear that Perth needs this wave of investment to continue and the injection by the State Government to date of Elizabeth Quay, Northbridge Link and Perth Stadium has given the private sector the confidence to also invest and that has been a major sustaining factor to our ability to ride out the mining downturn with some robustness.

So as we say adieu to 2016 – we have to do so with some mixed feelings. We have seen some green shoots but other sectors such as the office sector are certainly feeling the pinch.

But as they say – no pain – no gain?

And so maybe these tough times in the office sector will spur some other investment wave?

Regardless, I am looking forward to 2017 and the ongoing evolution of Perth!

To all our readers and their families – may you celebrate the conclusion of 2016 with great gusto! Regards the team at PropertyESP.

Be happy we live in WA!

I spoke to a group of real estate agents last week about why we should be happy about living in WA.

Very interesting topic indeed!

As I prepared the speech I thought to myself, was it because the State Government had committed $24 billion to infrastructure projects over the next four years that I had reason to feel so positive?

Or that everywhere I looked at the moment, I only saw cranes in the skies of Rivervale, Northbridge, Waterbank or Elizabeth Quay?

Maybe it was because, despite unemployment rising, we still have the best employment rates across the nation?

Or was it simply because demand for housing far outstripped supply?

Take your pick!

With all that is happening, it has to be duly recognised that WA and Perth are now undergoing a significant period of transformation.

This is a time for firsts, such as the $389 million Ritz Carlton and there is nowhere else, quite frankly, I would rather be!

This means that now is the ideal time to also take stock, assess the situation and if needs be move into new areas, become more competitive and be truly innovative!

We recently saw that BHP and Rio Tinto dropped their prices so as to remain competitive with their iron ore exports. FMG failed to see the signs and were caught out. They wanted an enquiry – but at the end of the day – you are strategic – or you are not!

Unequivocally Perth is entering a new era and in ten years’ time we won’t even recognise the Perth of today.

That is good news and we should be shouting that from the rooftops!

So take that as a sign that maybe it is time for you to also change up your game and see what you can do to make the most of these happy times!

Good luck!

PropertyESP loves to research sales and property trends and then share the news through motivational speaker Samantha Reece. If you are looking for an interesting insight contact PropertyESP at http://www.propertyesp.com.au