Investors and owner occupiers are continuing to vie for assets in Sydney's inner city market. A subdued supply pipeline and the continuation of older stock for residential conversion is increasing competition in the sector, while its range of transport, retail and leisure options continues to attract prospective occupiers and residents to the area.
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Much of the stock for office or light industrial use on the market is older, and this means that price should not be taken on face value, as not all assets are equal. While older stock in this precinct can often command a lower end price and rate per square metre, they sometimes require a higher level of capital expenditure to bring it up to the Building Code of Australia occupancy standard. This means a buyer's investment strategy needs to be carefully considered, particularly for those who are newer to the process surrounding older stock or have perhaps favoured newer stock in the past.
A sale that demonstrates the prices and rates per square metre that an older property in this region can attract was 64 Parramatta Road, Forest Lodge, purchased by an owner occupier and sold by myself and colleague Gary Mason, along with Joe Ayoub of Commercial Central.
Sold for $6.5 million with a rate per square metre of $3500, this was significantly more competitive than similar buildings in the area that can command rates per square metre of $4500 to $5500. However, this was somewhat balanced by the capital expenditure required on the property due to it last having a DA occupancy approval from council in 1989.
It's important to note that the level of work required depends on when the property was built or when DA consent for occupancy was last lodged with council.
The regulation required under the Building Code of Australia has seen tighter standards on certain aspects over time. Key areas that need addressing because of these changes, and should therefore be considered by buyers, include building access such as maximum stair heights, along with fire safety relating to fire-rated doors, fire-escape access, portable fire extinguisher requirements and more. Ceiling height is another consideration, as is whether the building has accessible facilities.
While the buyer of this particular property was aware of the additional expense required, some in the market may not be. For those in that situation, it's of increased importance to be aware of required out-of-pocket funds, especially in a market such as the inner city, where competition for assets could see some make investment decisions quicker than usual.
Paul Hunter is JLL's director, metropolitan sales and investments – NSW.
