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Where investors can still buy Australian commercial property for less than $500,000

November 10, 2017

This small office on Lexington Drive, Bella Vista, is priced between $430,000 - $450,000. Picture: Supplied

The $500,000 property might sound like a thing of the past but investors on a shoestring budget still have a realistic chance of getting into the commercial property market.

The best bet for entry-level investors would be a strata-titled industrial property in a NSW regional town, data shows.

Nearly 5000 commercial property sales across Australia have been under the $500,000 mark in 2017 to date, with vendors pocketing a whopping $1.4 billion, an analysis of CoreLogic data has found.

Suite 8.04/2-14 Kings Cross Road, Potts Point, could yield up to 6.7 per cent. Picture: Supplied An office at suite 8.04/2-14 Kings Cross Road, Potts Point, could yield up to 6.7 per cent. Picture: Supplied

NSW led the nation with these sales, accounting for 31 per cent of the share, followed by Victoria with 23.6 per cent.

Almost half of these sub-$500,000 sales were for industrial properties, while offices and retail took up 27.6 per cent and 22.7 per cent respectively.

Investors were most likely to bag a property for less than $500,000 if it was in a regional location or on strata title, especially in NSW, where virtually all deals were in at least one of those two categories. In Victoria, the figure was 70 per cent and in Queensland, it was 65 per cent.

Numbers 466A & 466B Centre Road, Bentleigh VIC, are expected to sell for $550,000 to $600,000 each. Picture Supplied Two retail properties at 466A & 466B Centre Road, Bentleigh, Victoria, are expected to sell for $550,000 to $600,000 each. Photo: Supplied

Robert Lowe, Sydney-based director of metropolitan and regional sales at Savills, said he hadn’t had anything listed or sold for $500,000 “in years”. The lowest sale he has done recently was a retail strata property, which sold for $910,000 three months ago.

But Edward Washer, head of JLL’s Mascot office, also in Sydney, said although it would be “very hard” to enter either the commercial or residential market with $500,000, securing an industrial asset at that price point would be easier.

“You’d have a couple of options (in the industrial sector), probably more in the western Sydney markets where you’d be purchasing a small 80-square-metre strata unit and put in a one-man-band-type tenant in there. It’d probably return 4 to 5 per cent (yield),” he said.

This strata industrial unit at 10/16 Mahogany Court, Willawong QLD, could yield 6.9 per cent if sold for its guide of $435,000. Photo: Supplied This strata industrial unit at 10/16 Mahogany Court, Willawong, Queensland, could yield 6.9 per cent if sold for its guide of $435,000. Photo: Supplied

Mr Washer said because many people believed the residential market has peaked, buyers were realising that commercial property could be a more viable investment.

“Two years ago, a lot of people would be buying residential and that has probably turned a bit,” he said.

James Farrugia, industrial director NSW of m3property Strategists, agreed that there were “limited potential opportunities other than strata-title industrial units” in the sub-$500,000 range.

Unit 5, 3 Millennium Circuit, Helensvale QLD, is expected to yield 6 per cent on a $578,200 asking price. Photo: Supplied Unit 5, 3 Millennium Circuit, Helensvale, Queensland, is expected to yield 6 per cent on a $578,200 asking price. Photo: Supplied

“However, within the Sydney metropolitan area, it is still possible even in the context of strata-titled industrial units to achieve both desirable yield and capital growth,” he said.

For investors without a lot to spend, an asset’s rental returns should take top priority and strata-title industrial units could net a higher yield than a similar residential investment, Mr Farrugia said.

The weighted national yield sits at 4 per cent for houses and 4.4 per cent for units, Domain Group data shows.

A 53-square-metre office suite in inner Sydney suburb Potts Point, listed with Knight Frank’s Daniel Francis and Hamish Henderson, has a low to mid $500,000 price expectation. With a rental income of up to $37,000, that places the net yield at 6.7 per cent.

Sliding up the price scale, a strata-titled industrial property in Helensvale on the Gold Coast has an asking price of $578,200, with a 6 per cent yield. The asset has 237 square metres of building area and is listed with Colliers International’s Daniel Coburn.

Going to auction next week is a 50-square-metre office on strata title in Bella Vista. Norwest Commercial and Industrial agent Brett Beazley said he expected it to sell for $430,000 to $450,000 on a 4.6 per cent yield.

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