Low rates, high rents lead commercial tenants to become owner-occupiers

Contact

Mar 16, 2017

Low rates, high rents lead commercial tenants to become owner-occupiers

With interest rates at historic lows, and commercial rents on the rise, buying and occupying commercial property has growing appeal, says Fred Nucara, director of Beller Commercial.

The property at 20 Wilson Street, South Yarra, was bought by an owner occupier to be used as his architectural / design studio.
In image showing the location of the property at 18 Wilson Street, South Yarra.

With interest rates at historic lows, and commercial rents on the rise, buying and occupying commercial property has growing appeal.

In parts of Melbourne, commercial rents have grown from $300-$350 per square metre to over $400-$450 per square metre in the last 12 months, putting pressure on many commercial tenants.

The market is responding to the changed environment.

Fred Nucara, director of Beller Commercial, told SCHWARTZWILLIAMS, "The combination of low interest rates and high rental prices in commercial real estate at the moment make it more compelling for business owners to buy property rather than rent, as the dollar amounts of rent versus interest are equal, if not lower."

"While leasing commercial premises does have plenty of merit for many businesses," said Nucara, "conditions are ripe for those considering purchasing commercial space in Melbourne."

Rent increases and low interest rates led one former tenant with a coffee roasting business in South Yarra to purchase his first commercial property.

He bought the property at 20 Wilson Street for just over $3.1 million. After renting for over 20 years, and considering that a number of properties in the area had been sold for residential development, the former tenant could see it was more beneficial to own than rent.

The property next door at 18 Wilson Street was also bought by an owner-occupier, who acquired the property at auction for $3.5 million as an office for his architectural/design studio.