[ Podcast Transcription ]
This is the Commercial Property Investing Explained Series brought to you by Steve Palise. Find out how commercial property really works and start investing like the pros. Your education starts now.
Welcome to the Commercial Property Investing Explained Series with Steve Palise. I’m your host, Andrew Bean, and I’m here with author and founder of buyers agency, Polisi Property. Steve Polisi. How are you, mate? I’m good, mate. How are you doing? Fantastic. That intro never, ever gets easier to say. I mean, the more we do it, the better it is, but it’s never, ever easier.
It’s always a tongue twister. I don’t know why I wrote it like that. I’ve got my child Jew in May and like, we’re going through obviously all the names and stuff like that. Polisi is very hard to kind of say anything with, I can’t, I have to basically disregard all P names because it’s like Pepe Polisi and everything just sounds ridiculous.
Yeah, I could imagine. Mate, I can’t wait for you to become a father. Soon you’re going to be singing all of the Wiggles songs. That’s absolutely guaranteed. You’re just going to know every single Wiggles song. And now it’s got so bad that sometimes I will actually sing Wiggle songs in my head to myself and I’m starting to enjoy them.
That’s how much I’ve been listening to the Wiggles in the last five years, so. Maybe your brain is progressing as well. Oh, it could be, mate. I have no idea. But, um, yeah, like I started off hating the Wiggles, but the more I listen to them, the more I seem to like them now. And it’s fun with dancing with the kids, so.
So, mate, today, we’re actually going to be sharing a whole lot of information, particularly around infrastructure projects, transport, sporting fields, education, hospital infrastructure and investment, and a whole lot more. And plus, we’re also going to be going through our top 10 location list for industrial property that Steve and I have put together for you guys.
So, I’m pretty excited. It should be fun. Yeah. I’m looking forward to it. Let’s do it. All right, mate. So infrastructure projects, we’ll start there. Just going around the grounds, mate, can you tell us about the infrastructure projects that you have learned about in your studies? That’s right. So basically I’ve, I’ve gone to, and there’s a website and a group called the infrastructure partnership Australia.
So this is where I’m getting a lot of my data from. So don’t quote me on. I’m just kind of regurgitating the stuff that they’re putting out, but it’s good to look at from a high level point of view, but. The first thing that I saw is Australia’s population’s set to reach 49 million by 2066. So obviously to do that we need infrastructure and then that’s where they’re spending the money to try to help grow that population.
I just want to point out though that infrastructure spending does not translate to capital growth of your property in the short term. It’s just purely, it’s a long form kind of analysis, but it’s a good indication for the kind of how much of the area is going to thrive. So just keep that in mind when you’re looking.
The other thing I always come across is so many residential investors say, Oh, Steve, can you just give us some capital growth history of like what commercials done over the last 10 years? Cause they’re so used to seeing like medium house price increases for residential. But with residential, it’s like for like Andrew, like a three, four bedroom house is a three, four bedroom house.
And there’s lots of comparables in each suburb. But as we discussed before on the podcast, every commercial is different. Like we can look at say retail capital growth over the last 10 years, but a retail on the main strip is completely different to one, two streets back. For instance, they’re going to have different capital growth prospects and industrial like.
A Bunnings, for instance, is going to have a completely different capital growth to lots of smaller ones because they’re different values, different square space, more versatility, and things like that. So you need to look on a case by case basis. The only one I’d say you’d be able to look at the data and have somewhat of.
Reliability from it is actually office space, because if you’re in a CBD and the most offices don’t care where they are on the street. If they’re one street back, it’s more to do with the square meter site. So that one you can get a little bit kind of reliability behind the data. But as I’ve mentioned before, I’m not a huge fan of office space here.
You’re kind of paying for for a box in the sky with no land component. So, that’s why I generally like retail industrial over that asset class. Yeah. First of all, I mean, wow, that’s pretty interesting. So, our population was a 49 million in 2066. 2066, yeah. So, it’s doubling. Yeah, it’s doubling. Wow, that’s crazy.
Which it has done. The population of Sydney in 1980 was 2. 2 mil. So it’s where we’re going, if we’re growing fast, we’ve got the space to do it as well. Yeah, it’s awesome. I mean, we’d still be a long way behind China and America and those, uh, you know, big countries like that, wouldn’t we? Yeah, but it’s China’s like a bill or something?
It is, but the population again, doesn’t necessarily translate to how prosperous a country is. So there’s lots of countries that are going backwards, even though their population’s growing up. But the good thing with Australia, and we’re going to have a bit of a chat about this is, We’ve got the infrastructure, we’ve got the resources, we’re working on the transport as well and just lifestyle as well, obviously like we’re a little bit biased, but Australia is legitimately one of the best countries in the world to live.
Like I’ve traveled countries now, it’s the safest, best lifestyle, obviously think the people are best as well. So I think Australia has a good run coming in the next 50 years. Yeah, it’s, uh, it’s really interesting. I mean, we forget how lucky we are just to be born in Australia. Um, and the one thing that I’d have noticed about like with population, it actually does, say you have a podcast and I actually have a podcast, getting the same amount of listens as someone like that’s, that’s posting a podcast in America, it’s like the ratio is a way off because our actual population where the podcast is pushed to the most, or even like a YouTube video, the amount of views Are directly correlated with the population of the geography that it’s actually being pushed to.
So, like a really, really poor, like YouTube video that’s put out in America will tend to have way more views than exactly the same thing that’s put out in Australia. So, I mean, that’s the only, the only takeaway that I could probably have from the population there. I thought it was really interesting how you were talking about the different types of commercial properties.
Obviously, you know, we both understand that. But what you. Like what was not said is it’s also the different type of buyer changes the amount that someone is willing to pay for it as in like the cap rate. So if you have that kind of Bunnings portfolio and there’s a couple of those Bunnings in that portfolio, it’s going to be more of an institutional grade buyer that’s going to buy that.
So they might be prepared to pay for a, you know, a sharper cap rate to get that portfolio because it’s already put together. Whereas a single Stratus warehouse that one of your clients. And they’re going to need more of a return on that because they’re literally doing it to have a return and they need to be able to service the debt and there’s no added advantage by buying it as a sharper yield because it’s not like an assembled portfolio.
So it really comes down to as well as everything you said, but the type of buyer that’s buying the property as well. Yeah, nice spot on. It’s funny you mentioned the America and the social media posts. I actually had one last week where my Instagram posts hit a million views and a lot of that’s actually just come from America.
It’s just mostly Americans teasing my beard and giving me, giving me, give me jib about my stuff. But, um, yeah, that just took off in America and it went nuts. Yeah, it’s crazy. I mean, you have a TikTok as well, don’t you? I got a TikTok. I don’t actively use it. It’s just got his poster to all the medium.
That’s what, that’s what the social media team tell you to do. But, um, yeah, I mainly use Facebook and Instagram. I’m trying to actually get off the socials a little bit. Yeah. I mean, you need to be a producer and a creator and like a content creator on socials, but not a consumer. I think that’s the difference between like the different people.
Cause you can get trapped, like, especially on TikTok. If you’re starting to scroll TikTok, you can lose an hour pretty quickly. It grabs you, you know. Just dancing people is pretty interesting. So here’s a little life hack. Yeah. If you’ve got an iPhone, you can actually set limits on apps. So I’ve actually got like a 15 minute limit on each of the forums.
So that way it’s kind of stops me going in those rabbit holes where I just go in, answer the clients, answer some kind of socials, talk to my friends and then get off quickly. Yeah, that’s it. That’s the way to go. Learning about how commercial property really works has never been easier with so many great resources around like this podcast and Steve’s book, and he’s giving it away for free if you use Discount Code podcast on his website.
So go to www.policingproperty.com. Use discount code podcast to get the book free. All you have to. To pay for is shipping. What a great deal. So mate, how about transport and like job creation? I mean job creation is a huge aspect of where markets can change significantly over time. Talk to me about that.
So infrastructure’s the hard one where. They spend a lot of money doing it, but then you don’t necessarily see the direct job creation from it because it’s just literally the thoroughfare to the job creation. And that’s where the hospital and the sports centers and the office buildings and all that kind of come into it.
But the government’s obviously spending quite a lot. So the biggest value one at the moment in capital cities. Is the West connects. So that’s obviously going in Sydney. Uh, that’s 16. 8 billion. So they’re spending on that. And then that goes all the way down from like the Northeast links, North South corridor, the Metro Melbourne tunnel, the Sydney Metro to the Western Sydney airport.
That’s 11 billion. But the interesting one for me is, so I just said the West connects is 16. 8 billion. In terms of regional areas, the Melbourne to Brisbane Inland Rail, they’re spending 14. 5 billion on that. So that, that east coast of Australia, there might be some good opportunities for commercial investors as we basically, we’re connecting the major cities.
We’re connecting the Melbournes, the Brisbane’s and the Sydney’s all together. So that might be a bit of a golden triangle moving forward. Yeah, so the WestConnex has been, they’ve been working on that for a long time, haven’t they? Yeah, so I think it’s been going five years or so and it’s, I think it’s got another five or seven years.
But again, it’s, it’s a major project. Like you’re literally, literally connecting cities together, um, and then digging tunnels and doing all that type of stuff. But it’s a, it’s a good indicator that you can have the population growth because it just connects everyone together. Yeah. Well, the North connects has been a game changer for people, you know, going towards central coast and things like that.
That’s a huge game changer, especially for me, particularly because I use the M2. So the M2 goes into the North connects. It cuts out like at least like 40 minutes. Like if you’re going to go the other way, the long way. So huge game changer. And especially when we’ve spoken about this on other podcasts is with COVID as well, and the new working from home culture.
If you are just doing one or two days a week in the office, all of a sudden the areas you get to choose from to live in is just opened up. Like people are willing to live two, three hours away sometimes now if they only have to go in the office one or two days a week because there’s more affordability, more lifestyle in other locations outside the capital cities.
Yeah, a hundred percent because, you know, they will only be possibly traveling once or twice for those big meetings potentially and they can just chill out and have a great lifestyle right next to the beach. Who wouldn’t want to do that? And you’ll still save time as well, like I used to commute in Sydney about an hour and a half door to door, so that’s three hours a day, so that’s 15 hours a week I’m losing, travelling two hours each way once or twice a week, I’m still well in front.
Yeah, well, actually, you know, it’s just dawned on me, you’re the ultimate working from home candidate right now, because you’ve been working from the UK, for how long have you been there, for a year or is it over a year now? A year and a half, so I think by the time I come back next year. We’re getting close to two years.
So it’s been a fun little stint. I didn’t intend for it to be this long though. Andrew, you, you know, like I was going to come over here for six, maybe 12 months, thought it would affect business and how it kind of works. And it actually just opened all the doors for me because what happened was I’m effectively just available now from 2 PM till midnight.
And whenever I talk to clients, that’s actually when they want to chat because they want to get home, have their partner on the call. Talk about the properties late at night, put the kids down, or if you’re a carpenter or a doctor or a surgeon or something like that, you can’t take an hour phone call during the day.
So, it actually opened up another world for me being able to talk late at night to people. Yeah. Well, if anyone ever says, Oh, it’s too hard, you know, working from, from like a distance, you know, having to work from home and operate in a different location, you can really say, well, hang on, I did it from the UK, mate, and my business is flourishing.
So, there’s no reason why you can’t. The funny thing is I had so many people say, I can’t believe you’re going overseas to work from there. Your business is going to fail. What are you doing? You’re a fool. You’ve just released a book and a podcast and all this. And now those same people are coming back saying, Oh, how are you doing that?
Can I do that? So it’s just people always tell you negative. You make it work. Like that’s the thing. You just always make it work. Yeah. When there’s a will, there’s a way. So mate, what about sporting fields and entertainment projects? This is a really interesting one because. Simon Presley actually put out a report a few months ago, probably about six months ago, that sporting fields actually are a huge driver in making residential markets boom.
Yeah. And I agree with, I actually love Simon Presley stuff. I follow his newsletter. He sends out a lot of good data. He’s probably one of the few residential wise agents who doesn’t just sell the dream. He sells data, which is quite good. So no, I really respect Simon. I actually agree with him. Having that type of infrastructure for like entertainment and sport and things like that.
The government are doing that because that’s where people want to live and where they want to congregate. So like, they’re not going to spend hundreds of millions of dollars building a stadium that no one attends. So there needs to be infrastructure between that and people need to be able to travel there versus want to travel there.
And that’s what the lifestyle aspect is. So some of the big ones at the moment, we’ve got Queen’s Wharf. That’s quite a good lineup in Brisbane there. 3. 6 billion worth of value there. The Gabba redevelopment, that’s 2. 7. Brisbane live is 2. 5 bill. So they’re all in Brisbane, by the way. So the top three spending sport and entertainment infrastructure projects.
Are actually in Brisbane. So as you know, I’m quite bullish on the commercial sector, especially in industrial in Brisbane, the government is spending more money than any other capital city in that region. So that’s why I think there’s some good prospects for the Brisbane, good affordability and some sharp yields as well, which we can go into a bit later.
Melbourne’s got the Arts Precinct Transformation, 1. 7 billion. Darwin City Stadiums, 300 million. Geelong Convention Exhibition Centers, 294 million. So there’s some kind of big infrastructure projects coming at the moment. Not as many as there was 10 years ago. That’s because a lot of the ones in the capital city have been built.
So now it’s more about trying to connect the people. As we mentioned before, the infrastructure and the transport. Getting, opening up the kind of net that they can cast to get people to those events is actually widening. Yeah, well, was there anything in Tasmania that I’m sure there was one something in Hobart that was a stadium in Hobart that’s getting developed just from memory from that report.
So you got regatta point multi purpose stadium. So that’s 750 mil. So. So mate, how about education projects? They’re a biggie. Yeah, this is probably the one where most residential investors as well always say, Oh, I’m buying in this area. They’re doing a university expansion or building a university. And that’s why they buy a residential, which I’ve always kind of found funny because does that mean they want to rent to a university student or they implying?
That the university students are then going to be educated and start earning money down the track. And if that is the case, that’s a very long term plan. I can tell you as a university student, when I left, you’re not on big dollars. You’re not paying a million dollars for a house. So it’s a good indicator for long term prosperity, but I think people think it’s a short term game.
Same as with like airports and stuff like that. How many people have you heard say, Oh, there’s a new airport coming. I’m therefore going to buy there. That’s a 2030 year plan. It’s not a, it’s not a five year plan, but in terms of turning universities, the front runner at 1. 9 billion is James Cook university expansion.
So I’ve actually always liked Townsville as a spot industrial. It’s the vacancy rates are high there, but the residential vacancy rates are really tight. So they’ve basically built all the infrastructure, the houses are filled in now. So I think the next phase is the vacancy rates will sharpen there.
However, we don’t know the timeframe. That’s what you always be mindful of. Other ones are, we’ve got the Flinders Village and University, the Bedford Park Campus, that’s 1. 1 billion, University of New South Wales Canberra Campus, that’s 1 billion spending there. And then most of the other ones, we’re generally talking about 500 mil around the grounds.
Pretty much every capital city has one, such as Griffith University, Curtin University, Charles Darwin, Meadowbank Education Employment Precinct. So there’s quite a lot going on in the education space as well. That one is a bit of a funny one with COVID as well. So… I’ll put my hand up and I’m one of the few who, I don’t know what the longevity of universities are.
I don’t think it’s going to be more to do with the hardcore learning part of it. I think that’s going to transition to quite a lot online. It’s going to be the socialist aspect of it, where people go and actually meet and collaborate. So, you’re talking about the online education courses could potentially take over and if that’s what you’re saying, I do agree with you because if you’re actually going to invest in yourself and get a skill like, you know, you’re going to do an online course on commercial property or you’re going to do an online course on sales and you could, that course will directly affect your income and you can start using that course because sales is essentially a It’s one of the best skills to learn because you use it in any situation.
So is that what you’re saying? That online education, like courses, like course builders, are you going to be disrupting the traditional education system? Yeah. And a lot of short form ones as well, but even just the way the university is going to present, like I can tell you, I used to dread my 9am Monday university lecture.
That was three hours. If back then they were doing like, Oh, it’s online. You can actually just watch it remotely. I probably would watch it remotely. Yes, you might slip into a bit of a fad where you’re not actually doing it, but COVID’s kind of changed it completely. So people are used to doing it from home.
I would still want to go in for the social aspect of it. Like that’s where I’ve met a lot of my friends, where you get involved in the university, like sport and education programs and stuff like that. But I think some short course type stuff, like you mentioned for sales and other, other aspects they’re really going to take off.
Yeah, it’s interesting, like the social part of it is really important because what you actually could do if you did live in the same vicinity as the campus, you can still go to all those campus parties, campus bars and whatnot, but you don’t actually have to study there. You could still do like other things, online courses also because of the expense as well, like the HECS debt now, and I think people are getting a lot more wise and educated about like going into debt.
To have go to university for a skill or a degree that you probably like, what is it? Like 60 percent of people don’t actually use the actual degree that they got or something like that. I’m pulling that from the sky from just from memory from reading reports. But, um, it’s a large number of people that what they’ve actually studied.
They never actually use it. So it’s a big waste of time. And then they have this big hex debt rather than like going straight into the workforce and learning a proper skill that can actually make you a lot of money. Like if you’re going to a university to like a business course or something like that, where the actual teacher or the lecturer, he’s never actually run or operated a business.
He’s just doing it from theory. You’re probably better off doing a course from someone who’s been tried and tested and ready to go and giving you the skills to make money and start without being in a hole of that big debt. It is a tough one though because like I studied engineering and even when I finished engineering, I probably only used two or three of the subjects in my actual job.
But what I actually took from university was every subject was a problem solving subject. You got given problems, you had to come up with a solution and sometimes had to be creative, sometimes had to be by the book. And that’s what I took from my degree. And it’s what I do in kind of business as well.
And what I do in property, it’s all about logic for me with that. So there’s still a place for university. So I’m not all the listeners thinking about, Oh, do I go to university? You’re not going to university. There are some huge benefits to going to university. Like there’s no way I would have studied engineering by myself at home for five years straight.
Like I just wouldn’t, I needed to actually go there and have a lecturer explain things to me. But you just have a bit of a think about what you’re actually trying to achieve out of your career. Yeah, I think it actually come down. Like you said, the industry that you’re wanting to get into, like if you’re a doctor, obviously you need to go to university.
Those professional medical professionals, like being engineer, things like that. That’s a must. Like, that’s not like negotiable, but a lot of people are finding different paths to making money. Like, it’s pretty crazy to think, In like 2023, you and I could be talking here on a podcast and you can make money from doing this.
15 years ago, that would have been absurd. Like, this wouldn’t have happened. You also don’t know where you’re going to be. Five, actually, what was it? Eight years ago, like when I was still an engineer, who would have thought I’d be having a podcast with you, Andrew, author of two books, running a buyer’s agency, like you don’t know what’s going to happen in the next 10 years.
Yeah, that’s it. So, mate, let’s move on to the hospitals. How are we doing in that This is actually an interesting one for me, because funnily enough, a lot of the regional areas actually have more spending than the capital cities, which, which somewhat makes sense to, to grow a regional area. You need to build the infrastructure, which includes hospitals to support the population growth.
It’s like the chicken and the egg argument. You’ve got to have the infrastructure first before the people come. But in terms of the capital cities, number one on the list is the new women’s and children’s hospital in Adelaide. So they’re spending 3. 2 billion there. Number two is the new Footscray Hospital at 2 billion.
Western Australia’s got the new Women and Babies Hospital. The Randwick Campus has a redevelopment there. Bankstown Lidcombe Hospital has a redevelopment there. And they’re all around the billion dollar. Frankston’s got one there for a billion dollars as well. And then there’s some other ones like Campbelltown, New Queensland, WA and Liverpool and things like that.
But the regional ones I mentioned before, that’s the interesting one. So New Coomera, that has a 1. 3 billion project going on. Toowoomba is another one. Bundaberg is another one. John Hunter Health and Innovation Precinct, Tweed Valley, Shell Harbour, Launceston, Albury Wodonga, Ballarat. They’ve all got half 500 million plus to 1.
3 billion worth of spending going on. So there’s a lot going on in the regional areas. And I’m not saying this to listeners to say, look, go out and buy the regional areas because New areas also have vacancy risk as well. So you need to weigh up where it is in the cycle and what the actual areas in doing in terms of vacancy rates for your commercial investment.
And also what asset you’re buying in that area. Quite a couple of those locations that you just mentioned are in our top 10 list as well, which is quite interesting. So definitely like the top 10 list is only for industrial because that’s obviously right now, in my opinion, and it’s just my opinion. The safest asset, commercial asset to buy right now, pretty much no brainer that it’s going to be a front runner for a very long time.
Office is going to be tough. I’d be worried about buying office and retail in patches is good, but still it’s more of a hit and miss and you need to know what you’re doing. So industrial is really pretty much a no brainer for everyone right now, I reckon. Yeah, I wouldn’t even say it’s just your opinion.
The stats are showing it as well, Andrew. Vacancy rates are literally at an all time low. Like most of them are down sub 5%. CBRE reported that most capital cities on average have a 0. 5 percent vacancy period. And again, this is just for the large industrial assets. The smaller ones have a bit more volatility in terms of the location and that.
But the stats are really strong. They’re actually the strongest they’ve ever been for industrial assets at the moment. Yep. Yeah, 100%. All right, mate. Let’s move on to clean energy projects. That’s a pretty interesting one. I’d like to learn about that myself. Yeah, I get asked about this almost daily now. So like the big thing is Australia is actually committed to the net zero target by 2050.
So basically to achieve that goal, renewable energy has to be a key focus. And 32. 5 percent of Australia’s electricity came from clean energy sources in 2021. So we’re actually not that far away from 2050 and they’re trying to get that to 100%. So obviously the government’s spending lots of money in the kind of green energy sector.
Number one on the list at a hundred billion, and I’ll say that again, a hundred billion is the Western green energy hub. So that’s in Western Australia. They’re building a hundred billion from green energy there. Some of the other big ones. North Queensland Super Hub, the Asian Renewable Energy Hub, uh, Starf, the South, um, is another one.
And then some infrastructure projects around it is the Marinas Link, uh, Hume Link, Victoria to New South Wales, Interconnect to West. And then there’s one called the Project Energy Connect, 2. 3 billion. But yeah, that’s going to be a one to watch out for in the long term. How that translates to capital growth, because a lot of the time these energy sites, Aren’t that close to capital cities, but we still need the infrastructure to support them and you still need some form of transport and then that’s where you’re kind of transposed that information to make your investing decisions.
In terms of talking about clean energy projects are we talking about like windmill farms and stuff like what actually is a clean energy project. All right, this is a rabbit hole we can go down, but generally wind farms are solar are the big ones that Australians spending money on because that obviously makes sense for us.
We’re a big diverse space. We’ve got the heat and the sun. I’m actually surprised in the UK how many solar panels here. I always kind of joke to my partner being like, what a waste. You only get it three days of the year. It’s not actually the sun. It’s the UV that comes through and powers it. Yeah. Yeah.
Fair enough. All right, mate. Do you want to summarize the above just so, uh, the listeners can really get a quick recap? All right. So basically everything we spoke about, Andrew, is all about boosting the economic growth. So that’s to create jobs, enhance livability, get infrastructure projects in, and basically just increase our livability and prosperity of Australia.
However, I want to point out though, that like the cost of the project doesn’t necessarily translate to the amount of jobs. All the capital growth that you’re going to get in the property. It’s just one of the few indicators that kind of put it there. Like for instance, sometimes like creating a hospital might give you 2000 jobs.
However, it’s actually going to create 5, 000 jobs once it’s complete. So like the, you’ve got to look at that side of it as well. But yeah, Australia is looking quite strong at the moment, vacancy rates all time low, infrastructure all time high, spending on transport, hospitals, education, so that all the ingredients are there.
You’ve just got to make sure when you choose the area that you’re using the right data to make a decision. Yeah 100 percent it definitely like it just because they’re spending money doesn’t mean anything will happen if you’re chasing infrastructure spend as well and that’s the only thing you chase you might be winning for a short amount of time but when that project finishes it could be detrimental to your investment like I actually um I was talking to an agent about a facility that I was looking at and it was like oh yeah there’s an infrastructure project here there’s supposed to be this and this so you’re going to have heaps more occupancy and I’m like yeah for a short time you know but then, you Things are going to go back to normal and it’s just going to be exactly the same.
So, you know, you really got to be careful and make sure you’re looking at the overall long term future projections, not just a short term gain from that infrastructure spend. Yeah, so what you’re basically saying, I’ll reiterate to the listeners, is say they’re building a major road or transport link, and then that fills up all the industrial warehouses because they need the fabricators, the storage, the machineries and all that.
Once that project is complete, that all of a sudden industry disappears. So you need to be mindful that you’re playing a very short term game with that type of thing. And it’s the same thing with everything. Like how many people do you know in like the residential space have been buying in like Sydney’s West at the moment?
Cause they’re like, Oh, new airport coming, new airport coming. But that doesn’t translate to capital growth in the short term. Long term, it can have that prosperity, but you got to look at more than one indicator. A hospital or a university or a new stadium doesn’t necessarily mean that areas is going to take off in the next five years.
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All right, so let’s move on to our top 10 industrialists that we put together. This is actually quite exciting because all of the data that we’re going to be talking about is sourced from CP data. So, mate, I thought we’d actually just first touch on one that I know you have had a lot of Activity in the last eight months, a year, and that’s WA Perth.
I’ve seen all the time secured this property for this client and they always seem to be really, really good deals. I think you’ve kind of, um, found a bit of a sweet spot in WA and Perth because you’re getting good yields. The properties aren’t really overly expensive, good tenants, and it’s an up and coming city coming from the depths where it was residentially.
So yeah. Tell me about WA, mate. Yeah. So it’s a Perth, a bit of funny one, because it’s obviously geographically the most isolated city in the world. However, it still has an awesome lifestyle. So like back in my engineering days, I’ve been to Perth 20 plus times. Cause obviously design a lot of mine sites and stuff over there.
Beaches and lifestyle is amazing there. So it’s got all that going for it. As always, you’ve got to pick the right area. Buying an industrial complex on the outskirts of the city is completely different to buying one that’s surrounded by residential, but if you’re looking for capital city, bang for buck in terms of industrial, you can’t beat Perth at the moment.
You’re getting 6. 5, sometimes even 7 percent net yields in that kind of inner hub. So I really like Perth for long term play. Just got to get the vacancy risk right. So percentage stock on hand. And again, this data is from CP data. So for the listeners, that’s actually Andrew Bing’s data sourcing site that he’s created.
He basically tracks all the information from lease sales, what’s going on the market, how long it stays there and transposes into user friendly data. But the big one for me, the vacancy rates look high there, as I mentioned before. So the general stats, he’s talking like 15 to 24. 5%, however, that’s because there’s a lot of new industrial complexes on the outside.
Some of the smaller ones inside the main city area, we’re talking around that kind of 0. 5 to 2. 5%. But again, you got to get the area right. Generally if you buy an industrial warehouse in that sub mill, you’re probably looking at kind of two to four months worth of vacancy. Yeah, a hundred percent. If you’re looking at the data and we are looking at the data right now for Perth, it seems like there’s a high vacancy, but that actually just means that could be a lot of construction and a lot of new stock coming online.
It doesn’t really actually mean there’s old stagnant stock sitting around there. So out of the actual top 10 list, and we’re putting this in no particular order. This is one that has the highest vacancy for industrial, but there’s just been so much development and so much like new stock coming online.
That’s why that vacancy looks a little bit high, but jobs going into the area, there’s 19, 492 that was listed last month. So the data that we’re looking at is actually from March, so it’s, you have to look at it. In the rear view mirror and out of that 19, 000 jobs, 7, 784 of those jobs are actually classified as higher income jobs.
So, 100, 000 and plus. So, there’s a good percentage of, you know, high income jobs there which having a higher disposable income is good. Obviously, we’re in an inflationary environment. So, are people spending? I mean, we’re not supposed to be spending. That’s why they’re putting interest rates up. But having that amount of money.
Being able to be spent on a coffee or, you know, things like that for those local shops and warehouses and things like that. It’s always a, always a good thing to have. Yeah. A lot of the interstate migration to Perth comes from jobs and that’s why they, part of the reason they move is that does pay a higher income.
Hence, like mining and renewables and stuff like that to get people over there, they have to pay a premium to get there. And that’s why they’ve got those high income jobs. That’s right, fly in, fly out, but they probably just fly in, they don’t ever fly out, do they? Because it’s a, it’s a, I’ve been to um, Perth, and it’s a beautiful place to live.
I mean, I would never ever go swimming in the surf there because of the amount of great white shark attacks that are there, like I just would not. But, you know, it’s a really nice place to live, like it’s beautiful. Andrew, you should know the stats though, you’re more likely to be hit by a car than you are eaten by a shark.
I just watched In the Shallows last week and that just reconfirmed my fear of watching draws as a little kid. I love swimming and I wish I could be out there surfing even though I can barely stand up. It’s just not worth it. I’d rather just swim in the, swim in the, in the shallows or swim in the, uh, beach pool and, um, that’ll get me done.
But, uh, yeah. Nice place to live. Beautiful. This is going to sound a little bit morbid, but my partner actually works in insurance. So for premiums for car insurance in WA, it’s actually lower than most of the other states. And it’s not because you’re less likely to have an accident. It’s actually because when you have a crash, you’re more likely to die in WA because the roads are much bigger and faster.
So you’re traveling a lot quicker. You’re also further from hospitals. So when you’re on the outskirts and you have a crash and it takes an hour or two for medical professionals to get to you, you’re more likely to die. And the worst thing for an insurer is actually that you become like seriously injured because you’ve got to pay a lifetime of support for like wheelchairs and disabilities and things like that.
Whereas if you die, you’ve got a value on your life. I don’t know what it is, probably a million dollars or whatever it may be that that is all they have to pay out. So it’s actually quite more, but it’s in lower car insurance because you’re more likely to die there in a car accident. That’s unbelievable.
So, a couple of the stats that we didn’t talk about were there in last month, there was 35 transactions of industrial property in Perth. So, that’s quite a lot. Currently, there’s 255 properties, industrial properties for sale. Last month, there was 23 new leases written in Perth and currently, there’s four leases, 398.
So, there’s a fair bit of stock there. But I, you know, it’s one of those places where I think. You know, we’re talking broadly at Perth, so there’s obviously markets within markets within markets and there’d be very, very tight industrial markets in there, which I’m sure Stevie knows that because he’s bought quite a few properties there.
Yeah. And it’s not a small city as well. And like I said, they’re actually building quite a lot of new industrial complexes on the outskirts of the city. And that, that’s why those numbers are skewed a little bit for the for sale. Like, like you mentioned, 255 for sale in March, that is way higher than all the other cities we’re going to talk about.
Yeah, that’s right. All right. So the next one, the one that I really like, and I’ve really, um, been beating the drum on this for quite a while is South Australia, Adelaide. And there’s been a really, really. Sharp tightening of yields there in probably the last two years and it’s still very, very tight. If you speak to any agents in Adelaide and broadly Adelaide for an industrial property, they’re still quoting very, very low sixes or, you know, below sub six.
So, there’s a lot of opportunity there if you already owned a property. Like if you owned a property a couple, like three, four years ago, you would have seen huge capital growth. But the good thing about Adelaide. Is that it’s got very, very low supply of industrial property. The stock on hand for sale right now is only 2.
2%. And there’s a lot of movement in terms of like new leases written. So there’s 19 new leases alone, a lot of new jobs. It’s just one of those places, I think. Until like the last two years, I think investors kind of forgot about, you also don’t have to pay stamp duty on commercial property. So it’s, it’s a really big plus there.
Um, and particularly down towards Gawler, there’s a really, really good opportunity from Gawler to Manopara where eventually like, Those two cities or those, the region, little town, Gawler and Adelaide in five, 10 years, they’re actually going to connect. Like you can see that there’s a lot of residential subdivisions that are slowly creeping towards each other and they eventually will meet the most of the land in that space that I’m talking about.
Is currently zones rural, but that’s actually getting changed. So I really, really like Adelaide long term and in the short, but look, if you’re looking for yields, it might be hard to find something, you know, six and a half to 7%, but you could get lucky or you could find an asset that’s very run down. And then you could look at potentially refurbishing it, creating a new space, just creating income or buying it.
Underrented, which is the best way to do it. So a lot of opportunity in Adelaide and it shouldn’t be overlooked. Yeah, and like you mentioned, you’re getting the stamp duty concession as well. So that kind of saves you 4 percent going into the cost. So you’re not spending as much going in. You can still get a decent yield.
Like we’re not talking six and a half, like you mentioned, we’re talking four and a half. If you can get a five in front of it, it’s quite a strong area. Um, as, as you know, Andrew, we’ve, we’ve obviously bought some properties to get some retails in that Gawler region and looked at some self storage in that kind of strip as well.
So there are some good opportunities there for investors. Adelaide for me is probably the steadiest performer in the last 20 years. It’s this, even the residential market, the way they plan it. And do it. If you look at it on a graph, it’s the most linear line out of all the other capital cities. All the capital cities kind of have a volatile moment where they grow really quickly, then they do nothing, then they grow again.
Adelaide is a nice, good, slow, steady horse performer. Yeah. And that’s residential and commercial. Like it’s just slow and steady. And like. Yeah, I’ve obviously been to Adelaide a few times and the way the city is laid out as well. It’s just been well thought out, like really wide streets in the actual like city center.
It’s just like, you know how Sydney is like, it’s kind of chopped together. Like it was like an afterthought, like, Oh, we should put a street here. Let’s go one way. Let’s. Let’s do this. Like the driving in the city in Sydney is an absolute nightmare and should be avoided unless you want to give yourself a really big headache.
But driving in Adelaide, it’s just such a different atmosphere and obviously there’s less people, but the actual city has been well thought out and put together. You know, you can get from the beach to the city within half an hour from Glenelg beach to the city. Like it’s a really, really good. lifestyle opportunity.
It does get a little bit colder, but I think it doesn’t get too hot there either. So, I mean, I like it. I definitely do a stint in, um, Adelaide, um, if the missus was permitting. Yeah, Adelaide’s stunning. And like you mentioned, the getting to the beach to the city is actually quite easy, even if you want to go down south.
So, I’m actually buying a lot of residential properties for my clients down at like Hallett Cove, Seaford, Aldinga Beach, areas like that where you’re 30 minutes away, but you can buy a house for 500, 000. Two streets back from the beach and I’ll rent for five 50. Yeah. There’s some good opportunities there, especially I know we’re talking industrial, but in the retail sector there as well, if you can get a good kind of retail strip near one of those beaches, those are bustling, hustling and bustling there.
So some good opportunities there as well. Yeah, definitely like down there. Christie’s Beach is quite a good area. There’s a lot of, um, development going down there. I’m like buying, you know, larger blocks and subdividing and stuff like that. Also with like places like Adelaide, there’s less investors looking at it.
So you have more of a chance. And now like with interest rates going up, that’s actually got better as well. So if you’re looking at a Brisbane or somewhere in Queensland, there’s a lot of people that are looking at that market and Skimming over all of the listings, but Adelaide does get overlooked a little bit, but it’s definitely one of those places where slow and steady, it would have to be the winner in that, in that, like respect.
Yeah. Well, one of the reasons for that, Andrew, is a lot of the Sydney people look around New South Wales, same as the Melbourne people look around Victoria and then the Britain people look around the surrounds there. Then the Sydney, Melbourne, Brisbane people, because they’re so quite close, everyone has been like, everyone spends a weekend trip up to the Gold Coast and areas like that.
So they get that kind of interstate travel where people feel like they know the area in quotation marks because they’ve been there a few times. Whereas a lot of tourists probably only go to Adelaide, I don’t know, two or three times over the 10 year period. So it is like, like you said, it’s a little bit of a sleeping giant.
Yeah, that’s it. So next on the list, Steve, we’ve got two in this location in Queensland. I know these are near and dear to your heart because you’ve had a lot of transactions here as well. Sunshine Coast. Let’s start there. Sunshine Coast is one of my favorite locations in Australia because it’s the numbers are really strong.
Yeah. However, the lifestyle score is this incredible for me, like interstate migration through the roof, the population growth. I think I had last year was like 9. 8 percent increase. It’s the place to be in Queensland. Funnily enough, I actually went was about two years ago. Now in 2021, I went to the commercial town hall meeting.
And the industrial stock that was supposed to last them till 2030, they actually had filled up back then. So they’re scrambling trying to build new infrastructure projects just to be able to handle that population growth, which is good for the next 10 years as an investor. You know, you’re always going to have a tenant.
There’s huge demand there. But in terms of the numbers, there’s not much stock on hand. It’s 2. 2%. So there was six sales transactions in March, but the, for me, the vacancy, and this is just as a whole 5. 4%. And again, this number is a little bit skewed because what happens is they’re building a lot of new estates on the fringes.
So that’s where they’re building the residential states, the commercial estates, that kind of tightly held air in the middle. There’s actually a waiting list in some suburbs. If you talk to a property manager on the ground, you’ve got two or three tenants waiting for, especially the smaller ones. The 50 to 500 square meter warehouse, there’s this huge demand for those at the moment.
Yeah, that’s it. I think it’s 9. 5 percent in CP data, but that takes into account lots of stock coming in as well, but everything you said, mate, is definitely on point. I did notice quite a few months ago that if anything industrial came on, the days on market were ridiculously, like, low. Anything that came on that was, uh, half decent.
People are all over it because if you’re looking for yield, you can comfortably get something in between, I don’t know, six, like low sixes, six and a half now, depending on the asset, but it’s one of those places where it kind of ticks a lot of boxes. So, definitely have a look there if you guys are interested in, in finding a place that has lifestyle, potential good yield.
It has a really, really. Large range, uh, for rate per square metre, which I actually really like. So on the low end for a rate per square metre for industrial, you could be looking at a hundred and ten a square metre, which is actually pretty high for industrial if you’re looking at the whole of Australia.
But then the really premium A grade stock actually has touched two hundred and eighty dollars per square metre. So there’s a huge gap there and huge opportunity to find really under like. Just under rented and like run down industrial property and then just do a little bit of like a facade, you know, do a little bit of refurbishment or like when you, at least when you just change tenancies, you could just bring up the rate to market.
So like if you’re increasing the rate by five, 10, even, you know, 15, 20 over a large property, it can equate to really big money. So big opportunity there with the rate per square meter range. Sunshine Coast is one of the few markets where sales agents actually tell me If I get more interest from owner occupies, then they do investors.
And that’s because of the infrastructure that’s gone in all those businesses need somewhere, which is a good indicator for prosperity. And I lose quite a lot of deals to them because I just, once they found their site and it fits their brief, they don’t care what they pay for it. So it’s great for investors if you already own there because they bring up the price for you, but it just means it’s a little bit harder to get in because you’ve got to compete with these owner occupiers.
Yeah, that’s right. Next one in Queensland that we both really like for the stats is Caloundra. Yeah, I love Caloundra, especially a lot of those kind of southern beaches. So like Warrana, Badena, Kerindi, uh, what else is there? Um, Golden Beach, Pelican Waters. There’s some really good opportunities down there.
So that’s covering the kind of South region. Uh, but the numbers are really strong as well. So vacancy rates, 4. 7 percent at the moment. So it’s actually getting to some of the tighter ones. And we’re, we’re working down the list in terms of tight vacancy rates. But yeah, it’s a really strong spot. Terms of lifestyle and population growth.
It’s up there amongst the best. Yeah, that’s right. And there’s actually quite a little, like a few pockets. If you look at Caloundra on a map and you just go back a little bit on the map, there’s quite a lot of little pockets of industrial property that are popping up, like industrial estates that are popping up just behind it.
So I think there’s a lot of development that’s going to be happening over the next 5 10 years. Because once again, Caloundra is a real lifestyle area. It ticks all the boxes in terms of beach lifestyle. And also, I mean… What about affordability with Resi there, Steve? How’s the residential property market?
I’m sure like anything close to the beach would be pretty expensive, but you might be able to pick up something decent 10 minutes, 15 minutes away from the beach. Yeah, but even on the beach, if you’re a Sydney or Melbourne investor, like it’s still cheaper. It’s still about 40, 50 percent cheaper than some of those inner ring areas.
So it’s a good opportunity. One of the point I want to let listeners know though is I like industrial properties that are near coastline because all of a sudden you’re taking oversupply out of it because one side of it they can’t build out. So if you buy in a good area where say we’re on the east coast and on the western side of that industrial precinct it’s fully committed to residential and you’ve got that ring, you own that market.
If that population of that suburb is growing. You’re not going to be priced out. There’s going to be more demand for that commercial tenancy over the next 10 years because there’s going to be more people. You’re going to need more car mechanics, wholesalers, distributors, fabricators, storage, and that’s going to give you the demand there as well.
Where you got to be careful is when you’re buying those fringe areas. So if you’re buying, say West where there’s a lot of land supply, that’s where you need to be careful and talk to town planners and find out what’s going on in the area. Yeah, definitely. It’s that, that’s that debate about buying regional or buying coastal that the built in scarcity of industrial land in a coastal area is obviously going to be a lot tighter than buying in like a double where they just literally have a lot of land that can just keep on expanding.
There’s not much that’s like holding them, containing that actual growth, but industrial land. In a coastal area, particularly if you’re really close to the beach, like close to the coastline, if there’s no more land to build industrial properties, then you’ve got the scarcity baked in, which is really handy.
Yeah, it’s a finite location as well. People love lifestyle on the beach, whereas someone like you mentioned Dubbo. The people are moving there for the tree change. It’s not a seed change. So where exactly they are in Dubbo can actually change and it won’t affect their lifestyle that much. But someone half hour from the beach is completely different lifestyle to someone five minutes from the beach.
So you get that scarcity factor there. Yeah, that’s right. All right. So this is a controversial one. You know, I know that you have a few good opinions, few strong opinions about this location. Hobart. How do you feel about Hobart, mate? Hobart, again, lifestyle wise, it’s actually stunning. Um, however, it’s still a small city.
So, like, it’s not big in the grand scheme of things. And similar to Dubbo, there’s lots of land to be released. So, I actually know a few developers down there doing some big projects and making some really good returns. Like, the cap rates, we’re talking for industrial, are 6 percent to 7. 5%. So, you get a really good bang for buck.
However, be careful with the numbers because one in quotation marks, in the Hobart kind of precinct, Is much more demand than one on the outskirts, 10, 15 minutes away, but they service different regions as well. So like the ones that are in the capital city in that main kind of little central zone, they’re more service based businesses.
They’re the car mechanics and the spray painters and the little kitchen repairers and suppliers and things like that. And as you move further out, they get to more like the logistics type ones, the fabricators, the distribution, things like that. So just know the market that you’re in. I like Hobart as a whole, like I’ve purchased probably 200 plus residential properties there about five years ago when they were 300 grand and they kind of jumped to about 550, 600 commercials, kind of seeing that jump as well.
So you’re getting a good yield, but you’ve got to be careful of oversupply. The numbers are still strong though. So CP data showing 5. 3 percent vacancy rates. So if you’re looking for a really good bang for buck, definitely worth having a look at Hobart. Yeah, it’s also got a good widespread for the rate per square meter too, because I mean, in Hobart, it’s more of a older type of industrial property that you’re probably going to be purchasing.
So, like, unless you’re going into more of the newer industrial areas, but there’s a good potential there to be buying a property that has the chance to be able to move the rents up. So, you’re looking at it as a low 60 per square meter for industrial property in Hobart. And on a high, a high range of 200 bucks.
So 200 for rate per square meter, that’s a lot. Like if you’re looking at like a 800 or a thousand square meter, um, facility, that can be a lot of money. If you’re just moving up, you know, 50 bucks, that’s really the power of commercial property is that every single dollar makes a huge difference. And the reason that.
Industrial property usually has a lower rate per square meter than your retail and office is because an industrial properties are always bigger. So, usually an industrial property will have a huge space so people can’t pay the same amount for the rate per square meter as you could for like a small retail because the amount of money they can make from that property.
Is also in relation and being an industrial property over a retail property. So, like 200 is a high point in Hobart for a grade property in a really, really prime location is, is pretty good money. Yeah, and you get some good bank for buck as well. I’m finding I’m buying a lot of like blue chip tenant ones, especially on the outskirts of Hobart and even, even in Tasmania as a whole.
I bought a lot in like Devonport and. Launceston bought a quite a lot of it on the lawn system as well. You get really good bang for buck. If you go spend a million dollars there, you can get a huge warehouse. Whereas if you try to go like a Sydney, Melbourne, or Brisbane, you get in a tiny little warehouse for the same cost.
So that brings, because it’s freestanding and large brings value out opportunities. You’ve got extra land to develop, you make multi tenancies, you can put solar panels on the roof and you can split the tenancies up. Like you said, you can get something on a low cap rate, a sharp yield and increase the rents and make money that way.
Um, there’s, there’s quite a lot to do, some good opportunities. If you want to get your hands dirty, definitely look at Tasmania. So the next area that we’re going to talk about is Victoria. There’s also two in this area, but one of them is actually kind of like, it also has another area involved with it.
And you’ll understand that when I announce it and that’s Wodonga. If you’re looking at Wodonga, like this is a really, really good area for value add, you also have to be taking into account. Aubrey, which is obviously in New South Wales, the border there. So if we’re looking at Aubrey, Wodonga and in CP data, it’s split up.
And we’ve also split it up in, in this top 10 list. But the reason why I like Aubrey and Wodonga is you can get really good yields there and it’s really, really tight vacancy. So you’d be looking at like a yield of 5. 75 to 7. 5 in Wodonga. And it’s pretty much mirrored in Aubrey. So if you know Wodonga or you know Aubrey, you pretty much say hand in hand.
But the statistics are actually also very, very similar, you know, with six new leases being written in Wodonga by March, um, 11 new leases in Aubrey, there’s just really good activity there, potentially to be getting good yields. And, you know, the best, you know, Advice I think James Dawson ever gave me was you need to be buying things with very, very good yields, not risky yields, but very, very good yields.
Because in times like this, you know, when bad times and interest rates go up, you need that extra buffer. To be able to keep paying for that property. So, Wodonga does tick, Albury Wodonga does tick a lot of those boxes where you’ve got tight vacancies. You’ve got nice high, uh, yields. You’ve got less demand because it’s in Albury Wodonga.
And you’ve also got border where if you know planning, um, very, very well for one, then you can choose that location, um, instead of going into the other. So, Victoria and, and New South Wales. Mate, what do you think about Wodonga and Albury? Yeah, Aubrey, we’re doing a great spot, um, population growth really high as well, similar to Sunshine Coast.
Yeah. People actually moving there. Yeah. It’s worth pointing out, like, regional towns, and I, I, I buy a lot in Capital City because I try to minimise risk with vacancy. There are a lot of regional areas, as you can see with this CP data, that you can get low risk regional properties. And funnily enough, a lot of regional areas outperform Capital Cities.
And the same thing goes for residential. A lot of, 17 out of the 20 best performing residential areas in the last 10 years. We’re regional towns. They weren’t capital cities. It’s just people talk a big game when they buy capital cities. Cause they go, I bought this for 1. 5 million Sydney. It’s now worth 2.
- That’s no different to buying a 300 grand warehouse in Aubrey Rodonga. That goes to 700. You’ve actually got a better return from that. It just doesn’t seem as impressive when you’re big noting yourself, but definitely if you can’t afford to get into the big markets, look at the regional areas because there are some really sharp cap rates there.
Yeah, that’s it. It goes back to that argument, like, are you safer in a capital city or are you safer in a region. If the region has tighter vacancy, maybe you’re actually more safe in that region. It’s, it’s a really interesting argument. And I think the data does tell the story here. Yeah, go to my website.
I’ve got a stress test calculator for interest rates. And this is a point I say to people when you are getting a high yield, if there is a recession and then the rents come down, You’ve actually got more fat to stay positively geared because if you’re buying something at say seven, seven and a half percent net, and then that brings it down to say five and a half percent, that’s a much better outcome in terms of your cashflow than having a five and a half percent net that drops to four and a half or three and a half percent.
So it actually can add another layer of buffer for you. Yeah, definitely. And just, uh, going back onto your infrastructure projects. Um, I did hear you mention, um, Wodonga back there as well. So definitely a good investment of infrastructure spend in Wodonga, Albury Wodonga as well. Yeah. And if any listeners want some information on any of the areas we’re talking about, just feel free to email me.
I’ll send you all the data and the reports and you can make your own decisions. Yeah, that’s it. All right, mate. So the next one in Victoria, um, this is just absolutely gone bonkers. Geelong, mate. Tell me about Geelong. Geelong’s again, it’s, it’s one of the ones I always compare Geelong to like the central coast and Wollongong to Sydney, where you just get that affordability factor and that’s forced people to go there.
So we’ve seen, like you mentioned, it’s gone bonkers, like cap rates that were six and a half percent a few years ago and now down at kind of the five to six percent. So really sharpened up. But some good opportunity there. And again, similar or Ruronga vacancy rates 3. 9 percent at the moment for industrial.
So really strong, good livability scores, good population growth, tight vacancy rates, decent yields. So definitely some opportunities there. Yeah. I think if from all reports and boots on the ground agents that we’ve spoken with, if you can get a six cap, like in Geelong, you are doing bloody well. It’s like almost.
Very, very, it’s so difficult to get that, like the property that you’re getting in a six cap needs work. It could be vacant, you know, it’s, you’re doing really well if you’re getting a six cap in Geelong, you know, if you’re looking for yield, like probably better places to look, but if you’ve bought something in, or you already held property in Geelong over the last, like before two years ago, you would be Definitely smiling because before the commercial boom, Geelong used to be like a percentage higher yield than like, you know, your inner city Melbourne, but it’s basically just exactly the same as, you know, Melbourne now, maybe even maybe a little bit not as tight, but it’s just gone crazy.
You talk to any agent down there and like, there’s no way you’ll be able to get that, like don’t even pick up the phone anymore. Yeah. So similar to Sunshine Coast, the agents are actually saying that they’re getting more owner occupied attention than they are investors, just because of the population growth and infrastructure going in there.
The businesses need somewhere to operate, profitable businesses by the, by the premise. So especially the smaller scale stuff. Slightly different when you’re talking like the 10, 000 square meter plus ones, but any of the smaller premises, they’re just getting snapped up really quickly, which is again, good long term prospects.
If businesses are successful, then obviously the area is going to do really well long term. Yeah, that’s it. All right. So that brings us to our last state, which is New South Wales. We’ve got two, uh, selections here. The first one that. I really, really like, but it’s very, very hard to find any property to buy there because it’s, it’s such a tightly held marketplace that if anything comes up, people just around the area tend to buy it.
So. Cost Harbor has been one that I’ve really, really liked for a long time, but in terms of like, if you’re looking for deal flow or you’re looking to find property there, you might be waiting for a while because it’s just not much, there’s just not much comes onto the market, but if you’re looking at like cap rates, you can pick up something between five and a half to six and a half percent with a rate per square meter range of a hundred bucks to 150, really tight vacancy, 3.
7%. And There’s just not much to not like about this area. Yeah. So I actually lived in Coffs Harbour for a couple of years. That’s right. Yeah. I was at about five, actually six, seven years ago now. I remember I was finding literally industrial sheds and your favorite self storage at like eight to 9 percent cap rates.
Yeah. And I remember I actually talked to myself out of it cause I was, I was early onto my commercial investing back then. I was just like, nah, I’m missing something that can’t be that attractive. But again, fundamentally you’ve got the coastline. You’ve got that locked in supply. And like you said, locals actually love it.
And it’s probably the, the, one of the major areas between Sydney and Brisbane. Like it’s a good halfway point. So longevity wise, Coffs Harbour will be a really strong performer. Lifestyle wise, beaches are stunning. People are great. Culture’s great there as well. So I think that’ll be a front runner coming in the next kind of five years.
Yeah, that’s it. I mean, there’s 78, 000 in population in Coffsiber, so it’s not a small place. Definitely one of those places where a lot of people from Sydney go up there for a little mini holiday at the beaches up there. So it’s a really, really good place for that. Yeah. You get the tourist side as well, where a lot of people drive up to like the Gold Coast and Sunshine Coast.
It’s a nice halfway point. So a lot of people stop there for two or three days. But in terms of migration in the area, that’s also grown as well. Some of those newer states are just getting built and snapped up really quick. Yeah, definitely. And the residential property prices went crazy there, too. I mean, residential prices and everything went crazy everywhere, pretty much.
You used to be able to look at something for around, you know, 400, 000 there. In the past couple of years, that 400, 000 house is like 650, 000, 700, 000 now. It’s one of those places where it’s seen huge growth. Um, and I think it’s also a really good place in terms of the lifestyle, like, like you said before, you might live there, but you might want to travel to Sydney, or you might want to travel to a closer city centre once or twice a week.
So living in that, in, in Coffs Harbour, you can still reach places quite easily, like Newcastle, you know, places like that. Yeah. So I was still coming back to Sydney when I was living there every two weeks for a few days at a time and Tiger Air flights, for instance, were like 60. So it was like cheaper than a taxi in Sydney anyway.
So as long as you’ve got somewhere to stay, you can fly in, fly out very easily. Residential market, I actually remember Andrew, I was looking at a house on the beach. There’s one of the Northern beaches there. It was about 1. 6 mil. And again, I didn’t buy it in this hindsight. Talk to myself out because the numbers weren’t as attractive as like some other areas because the yields, the gross yield wasn’t that strong.
But think of that now compared to like a beach front property for 1. mil, like they’re worth about three mil now. So again, one of those long lines where. Don’t look back like I’m talking about. Just make sure when you make an investing decision, you stick with it and you go with it. Yeah. As a property investor, hindsight is like an actual horrible thing.
Cause you’re like, Oh my God, why didn’t I buy more? Um, hindsight is not a property investor’s friend. Yeah. But have that tendency mindset. Like I keep saying on this podcast, if you look at a property and you say, will there be more demand for this property in 10 years time? It’s probably a good investment.
And then you step down the ladder and you go, okay, do the numbers make sense with what I’m trying to achieve? That property at the time, probably not. I was looking at the time to build about a hundred K passive income, which I’ve surpassed now. But that property at that time, even though it would have really good capital growth and given me a good outcome, wasn’t towards my goal of getting that passive income.
So that’s why I didn’t buy it. And that makes sense. That’s why I stick to High yielding residential, dual income, and then finally went into commercial. Yeah, that’s it. And I think, um, Coffs Harbour also has a higher population of renters as well, and also higher yields for residential property. Very, very high rent in Coffs Harbour.
So it is quite desirable in the residential market and, and the commercial market, but particularly high gross yields in residential from memory. Yeah, one of, it’s going to be one of those locations post COVID world will do really well. Yeah. All right. So we are down to the pointy end of things. We’re back into New South Wales with the location that has the tightest vacancy Australia wide, which is Tweed Heads.
Steve, tell me about Tweed Heads. I absolutely love Tweed Heads as you know, Andrew, and we’ve worked on a couple of deals together there as well, and I’ve probably purchased 20 or 30 deals in the last few years there. Yeah. So that whole Tweed Heads agent, like the Burley Heads, Palm Beach, Kool Gada. Some really good opportunities there, like the demand’s huge, vacancy rates are bulletproof, like we’re talking your CP data showing 2.
2, but it’s one of those areas where if you buy on the right industrial complex, waiting list type ones, we’re talking negative vacancy rates, so getting the right answer there. Cap rates have come down quite a lot, where I was buying at six and a half percent a few years ago. We’re now talking kind of four and a half to six and a half percent.
However, there are some good assets. If you buy on the outskirts, like you can get an eight percent cap rate. But generally, if you’re looking there, you’re probably talking around that five and a half percent, but some great value. Again, great lifestyle, short supply, lack of supply because of where it is on the coastline.
And like I keep mentioning, population growth there, one of the highest in Australia as well. Yeah, that’s it. I mean, to actually get a deal in TweetHeads is a feat in itself because there’s just not much that comes up for sale. Like there’s only four properties listed last month for industrial properties is 1.
4 percent of stock on hand. I mean, four new leases were written last month, but it’s, it’s one of those areas that. It has quite a larger range of like cap rate range. So you’re looking at like a four and a half percent to potentially an eight percent, but that eight percent property is run down as hell.
Like it’s not like something that one of your clients probably wants to buy because it’s the type of property that needs a lot of work. And it also. Could be vacant and it needs a strategy to bring it back up to being, you know, more like a CB grade asset. So it’s not like, uh, you can run out there and get an eight cap for a really beautiful property and it’s a set and forget.
No, it’s not. It’s a very scary property that needs a hell of a lot of work and that’s why it’s valued at that higher of a yield. Yeah. They’ve probably got a big disparity in ages of buildings as well. You can get, like you said, really run down ones. And then there’s quite a few newer states that have come in and they’re the kind of the lower yield end.
But again, the demands, they’re like, you are literally right next to Gold Coast Airport. Go and go to airport and you’re far enough away that you’re not right under it. So you’re servicing the local area and the population, but then you can also do the distribution side of things where kind of businesses that want to have like an e commerce site and things like that can run it through the airport quite easily.
Yeah, well, I actually just noticed that basically all of our whole top 10 list is all coastal, except for Aubrey Wodonga. Pretty much all of them are pretty close to the coast. And we didn’t think or factor that in for the report. It was really just the areas that were showing overall the best statistics.
And it’s just interesting now taking a wider look at it. That a lot of these places are coastal that would have done well in the, uh, working from home movement and COVID. So very, very interesting there. Yeah. And I’m not, I’m not saying the regional areas are bad investments, but the stats can get skewed a little bit as well, because a lot of the regional areas, especially like the tree change type ones, they’re building lots of infrastructure there.
And that’s why it’s actually going to be a really big area longterm. Like it’s the same as like I mentioned before, Sydney’s population was 2. 2 mil in 1980. Now, Western Sydney is two mil, so back where I grew up in Western Sydney, where I was farmland, that’s now fully established and a good spot and tightly held spot.
So you just got to pick your right area in those regional towns, get the areas that are kind of surrounded by residential properties. So you can get some comfort in the numbers, but just a bit of an exercise for people for Tweed Heads, go on Google Maps and have a look at where it is. And you actually see Tweed Heads is completely surrounded by water.
So you’ve got the coastline, then you’ve got the inlets. So they can’t build anymore. You’ve got a beautiful part of the world and literally the most limited stock available. And that’s why it’s performing really well. And you’re on the border of Queensland there as well. Yeah. And you’re good to some good capital cities as well.
So like I said, you can still get up to the Gold Coast quite easily. And then obviously Brisbane as well. Yeah, well, the Gold Coast was one of those ones that just missed this list. I mean, if there was an 11th location, then it probably would have been Gold Coast. We put together a top 10 list, but there’s a lot of locations that are awesome.
Absolutely awesome. But we obviously have to draw a line in the sand and the overall statistics for these 10 were the ones that stood out. But There are so many great places to invest Australia wide for industrial commercial property. It’s really an excellent time. In my mind, it’s actually never been better, like overall market conditions, statistic wise, vacancy wise.
And now that interest rates have gone up, less competition, people fearful, people that probably don’t listen to this podcast, that really. aren’t open to investing against the grain. So, like, they’ll follow the masses. If everyone’s fearful, they’ll be fearful. Well, that’s the time to be greedy. Like Warren Buffett says, that’s the time to get in there.
So, make sure you do get onto Stevie’s website and check out his stress test calculator because definitely now, this is the time when wealth changes hands. Times like this where you can get a great deal, more than ever, you can get. Really great deals with a lot higher returns and there’s wiggle room now.
Like we’ll talk about it in a different episode, but I’ve almost secured an option agreement on a deal today. I’ve got the okay, but like the way that I set this deal up, if this was back 12 months ago, there’s no way that this. seller would even consider what I was putting forward. But now they’re actually willing to give me an option on the property.
Like it’s just unheard of. If you’re looking or coming from a value ad creating a great deal, you know, kind of perspective where doing it like with no money down and things like that. Now is your time. Like now is your time to strike. And I believe now and for the next year or year and a half could be one of the best times that we’ve seen to buy.
Commercial property in terms of yield and taking advantage of, you know, investing. So that’s my spiel. No, spot on. I’m seeing some really good value add opportunities at the moment. And that’s, that’s what we’re targeting for a lot of clients. Like you said, best time vacancy rates, all time, low unemployment, all time, low.
Rental increases all time high, like the macro data is really strong. The only negative is interest rates are slightly higher, but that’s also why they’re high. They’re high so the market doesn’t go absolutely stupid. And I’m, I’m actually weirdly a supporter of high interest rates. I don’t want to see a market that grows by 50 percent and drops by 30%.
I like the stability of the market moving forward. Yeah, that’s it. All right, mate. Well, I think we should wrap it up there. This has been author Steve Polisi and Andrew Bean on the Commercial Property Investing Explained Series. Thanks, guys. Awesome. Thanks for listening, guys. Thanks for listening to the Commercial Property Investing Explained Series.
This show has been produced by the Commercial Property Show Network.
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