Tag: Commercial Real Estate for Lease

Perth Commercial Property Outlook 2022

After the initial hit to commercial and industrial property during the early phase of the COVID-19 pandemic, Western Australia’s economy has finally started to recover and looks set for a strong 2022. With a low unemployment rate and increasing household disposable income, Perth is tipped for a busy year in the commercial property industry.

The year of 2022 could be the ideal time to both buy and sell commercial property, especially considering last year’s sales:

  • Almost $40 million in $20 million plus sales were recorded in sales for 2021, according to m3property research.
  • $15 billion was recorded across office transactions, 60% higher than last year.
  • Retail witnessed 214% growth taking the sales value to $11.5 billion.
  • $13 billion for industrial sales, representing a 49% increase.

It is expected the sector will see even further growth than it did in 2021, which exceeded pre-pandemic levels.

With WA’s economy and unemployment rate (3.4% compared to the national average of 4.2%), it’s a great time for the commercial property market.

With investors and buyers expected to want to expand their portfolios to WA when the borders reopen, this year is the time to think about acting now in securing a commercial property.

Hot Commercial Real Estate Suburbs in 2022

Looking to buy your next investment property or commercial space, you want to be aware of the supply and demand of property in the suburb or area of interest.

With Ross Scarfone specialising in outer-suburban commercial and industrial properties in Perth’s South East, the suburbs continuing to see good demand are Welshpool and Kewdale.

For smaller properties in the surrounding areas, Carlisle, East Victoria Park, and Cannington are, too, continuing to see demand.

In 2022, we are expecting Burswood and Belmont to join the others in becoming in demand suburbs too.

Most of these suburbs are accessible to Perth airport, freight rail line, and major freeways.

The Office

In the last year, demand for offices has declined due to the face of work changing due to COVID-19 in Australia making vacancy rates high.

However, this year there is expected to be an office market rebound, and those looking to purchase a commercial office space have the opportunity to increase the value during this time of the Pandemic.

With Perth office vacancy rates decreasing to 16.8% at the end of 2021, experts see this as a vote of confidence.

Properties able to give larger office spaces to workers will be preferred as they can accommodate flexible work practices and respect social distancing measures.

Those looking to invest in a commercial office space must think of renovations and space in order to keep up with health and safety measures. There’ll be an increase in demand for spaces who make these changes.

As for industrial spaces, research found the sector thrived due to a boom in online retailing, and this is only expected to grow.

Great Time to Invest in an Industrial Property

This year is backed to see investors returning and expanding their Perth properties, especially with borders expecting to reopen sometime in 2022.

With WA having a strong economy, low unemployment rate, and high investor interest, it’s a great time to invest in commercial properties and act soon.

For a detailed breakdown of the Perth commercial real estate market or specific advice on warehouses for sale in Perth, call or email Ross Scarfone Real Estate.

Find Your Perfect Commercial Real Estate Agent

When it comes to choosing a commercial real estate agent, it’s important to find one who will be able to help you reach your goals, whether that includes selling, leasing, buying, investing, or developing.

Navigating these complexities can be overwhelming. Although, it doesn’t have to be if you find the right agent to support you. The right agent should understand your business needs, their local area, and be highly experienced and well-connected. They should have an exceptional portfolio of clients and properties.

Your agent should also ensure they develop a positive relationship with you, as you should have a good customer experience throughout your property journey.

They Should Know Their Local Area

When choosing a commercial real estate agent in Perth, it’s important to find an expert in your location of interest.

In terms of industrial real estate, there are four main quadrants within Perth:

  • South East Perth – includes Belmont, Canning Vale, Forrestdale, Kewdale, Maddington & Welshpool.
  • North West Perth – includes Balcatta, Joondalup, Landsdale, Wangara & Yanchep.
  • North East Perth – includes Bassendean, Bayswater, Bellevue, Malaga, Midvale, Morley & Osborne Park.
  • South West Perth – includes Bibra Lake, Cockburn Central, Jandakot, Naval Base, O’Connor, Port Kennedy & Rockingham.

If you want to rent or purchase a commercial property, it’s important to choose an area that has the infrastructure, arterial roads, and zoning that best suits your business’ needs. From there, you should find a real estate agent who is an expert in your desired location.

Within the South East Perth quadrant, Ross Scarfone Real Estate are experts in the commercial and industrial real estate sector. They have over 30 years of proven experience.

Find an Agent Who Understands Your Business

A good commercial real estate agent should have a niche that they really understand. When you are meeting with a potential agent, you need to find out whether they are a good fit to work with your business. You need to know that they really understand your requirements.

This means that if you are looking to rent, the commercial leasing agent should recognise your customer profile, and understand your day-to-day operations, turnover estimates, and the equipment and human resources that your business requires. They should also try to gain insight into what your future business plans are, so they are aware of how they might affect your requirements in terms of space, facilities, or the length and terms of the contract.

Your commercial real estate agent should be able to guide you to consider all necessary details about a new office, storage or warehouse space before you even really start looking, let alone commit.

In understanding your business, they should be able to scout for suitable properties within a specific location and present them to you, reducing your stress and giving you more time to focus on your business.

If you are looking to buy, sell or to lease your property, the real estate agent should also understand your business and financial needs.

Choose an Experienced Commercial Real Estate Agent

An experienced commercial real estate agent is essential when it comes to finding the perfect property with the right contract in place.

They should have a transparent portfolio of properties and clients that align with your business requirements. You need to ensure they have successfully looked after similar clients in the past, that have been of a similar size, complexity, and type to yours. While you are researching this, ensure they have a good reputation and that their previous clients would recommend them.

Your agent should also have an in-depth understanding of selling, renting, leasing, or buying a property from start to finish, so they can advise you on that process. This means they will be able to walk you through the documents and other information you will need to have.

A Well-Connected Real Estate Agent Is the Key to Your Success

Your commercial real estate agent should not only understand your business, have proven experience, and be an expert in property in your local area — they should also be well-connected.

This means they should have both local market awareness, and the ability to assist you if you need to relocate or expand in a different area. For example, if you are looking to do business interstate or overseas, they should be able to utilise their connections to ensure you have a smooth transition.

They should also have contacts to key personnel across the property sector, including financial institutions, solicitors, and surveyors. By utilising these connections, they should be able to guide you through every step of the leasing process by referring you on as necessary.

Ensure Your Commercial Real Estate Agent Communicates Well

Your commercial real estate agent should be available to you via phone, mobile and email, both inside and outside office hours (within reason). They should be able to communicate openly and honestly about all matters regarding your business premises and get all key information across to you succinctly.

It’s important you are able to understand what the agent is trying to communicate, so misunderstandings don’t arise —you need to know exactly what is in the contract and what you are getting as part of the deal.

If you need a commercial and industrial real estate agent or property manager in Perth, Ross Scarfone Real Estate has extensive experience and knowledge of the property market in the South East Perth region. They have been helping businesses thrive for over 30 years by leasing commercial real estate, including small offices, storage yards, and industrial warehouses, in an ethical and professional manner.

Ross Scarfone Real Estate - Commercial Property Agent Perth

Contact us for your commercial real estate needs

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The Truth About Rent Reviews, Increases, and Commercial Leases

Whether you’re a tenant or a property owner, your commercial lease agreement will contain a process for changing the rent, usually every year. 

Commercial leases are technical documents that can be quite difficult for a layperson to understand. So, to help you make an informed decision about your rent review, we’ve broken down the process and how it could impact you.

What is a commercial lease rent review?

The rent review of a commercial lease is the process of assessing if the current rent is in line with the market trends. 

Rent reviews are standard practice for commercial leases and you should anticipate the rent to change throughout the term of the lease.

If you’re a landlord, reviewing the rent every year can lead to an increase in income and ensures you’re keeping pace with the market. 

For a tenant, a rent review can lead to a change in rent, either up or down, depending on how the commercial lease is written.

Rent reviews must be written in the commercial lease agreement

In the commercial lease, it will be set when and how the rent will change. In most cases, the rent will change each year, but there can be variations. 

If you’re going to negotiate when and how the rent is reviewed, it must be before the commercial lease is signed. 

In the commercial lease agreement, it will stipulate:

  • the method of the review – how the new rent is determined, and,
  • the regularity of the review – when the rent amount will change

There are 3 types of commercial rent reviews

  1. CPI increase
  2. Fixed increase 
  3. Market reviews

CPI increase

CPI (Consumer Price Index) increases are done every year and depend on the rate of inflation at the time or the 12-month CPI adjustment.

The CPI is determined by the government and is published by the Australia Bureau of Statistics (ABS) each year. 

For Landlords

In most cases, landlords would be reluctant to rely on just on CPI increases as it disadvantages them financially. A CPI increase is usually lower than the other review methods as it doesn’t consider market demand or value of the property. 

To address this, landlords will pair CPI increases with a fixed increase, or stipulate that the CPI increase must be higher than a pre-determined fixed increase.

For Tenants

As CPI increases have been small in recent years, CPI rent increases can be beneficial to tenants. There is, however, a level of unpredictability and some tenants may prefer to know what to expect. 

Fixed increase

A fixed rent review is a set rent increase percentage, usually annually on the anniversary of the lease start date. 

The rent increase percentage is usually between 2%-5%, so every year tenants can expect the rent to increase by this amount. 

For Landlords

While fixed rent increase provides predictability and stability, there is the potential to miss out on larger increases from market reviews. If the market is hot, the fixed percentage amount set at the start of the lease might be less than what the market is willing to pay. 

However, if the market is dropping, you may end up receiving a higher rental income than your neighbour. 

For Tenants

For tenants, fixed rental increases have the opposite benefits. If the market is low and you’re able to negotiate a fixed rental review, you could maintain lower rent for years. 

But if the market if climbing, your commercial lease agreement might set a higher percentage increase to match the market at the time. If the market or economy doesn’t meet expectations, you could be locked into above-average rental prices that are out of proportion to your business income.

Market rent reviews

A market rent review will change the rental amount to be inline with the property market and similar commercial properties. 

To determine the market value, an independent valuation will be conducted to avoid disputes. 

Compared to a fixed increase, a market review will allow the rent to be reset and remain consistent with the economy. 

Usually, market reviews are reserved for the end of a commercial lease, if both parties wish to renew the lease. 

For Landlords

For commercial properties, a market rent review completely depends on the state of the property market and economy at the end of the lease. But such is the nature of commercial property investment. 

Ideally, if the market is increasing, regular market rent reviews will allow you to keep pace and continue increasing the rent at higher rates than a fixed review. 

On the flip side, if the market is decreasing, a market review could see your rental income decrease. 

For Tenants

While a market rent review for tenants can be an opportunity to reset the rent to align with your business’s income, it could also result in a rent increase that will be maintained for the term of the lease. 

Alternative commercial rent reviews

Some commercial lease agreements may vary the method of rent increase year to year. For example, instead of a fixed increase every year, the lease could include a market rental review every two years. 

By not having one type of commercial rent review through the entire lease, landlords and tenants benefit from low-risk terms. 

A tenant will know what the rental increase is every two years and have some predictability and a landlord can capitalise on market increases with the addition of stability of fixed increases if the market doesn’t perform. 

Changing your commercial rent increases  

Unless otherwise agreed, you may be able to negotiate a change in the rental review structure when renewing the commercial lease. 

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