The table and chart below can be used to compare the annualized 1 and 10 year total returns, average net yields and average lease terms for each sub sector.

The figures provided are for direct property across the whole Australian commercial market. The 10 year total returns are for results up to December 2008 and the 1 year total returns are for results up to October 2009* The total return is a combination of income return and capital growth. The negative 1 year total return is a result of negative capital growth being greater than the positive income return.

* Information provided by IPD

Key factors to consider for each sub sector and some recent sales transactions.

Office:

•    The majority of large office tenants have net leases, where the tenant is responsible to pay all outgoings for the property. Office tenants who take up smaller areas typically have gross leases.

•    Office property has a high fit out component and most leases require the tenant to install and remove this fit out at their own expense.

•    The main factors that influence the value of office commercial property investments is; proximity to public transport, number of car spaces, natural light, and proximity to a major CBD.

•    Recent office transactions include;

o    Freehold office building in North Sydney sold for $6.065 million on a net yield of 7.45% with an 8 year lease to government tenant.
o    Strata suite in North Sydney sold for $1.45 million on a net yield of 8.28% with a 5 year lease to Australian Catholic University.
o    Freehold office building in Brisbane sold for $15 million on a net yield of 8%, the building was 100% leased to 3 tenants with 65% of the income secured by Mirvac.
o    Freehold office building in Brisbane sold for $7.4 million on a net yield of 7.7%, the building was 100% leased to two government tenants on 7 year leases.

Industrial:

•    The majority of industrial tenants have net leases, where the tenant is responsible to pay all outgoings for the property.

•    The main factors that influence the value of industrial commercial property investments is; proximity to major transport infrastructure such as road, rail or seaport, exposure to vehicular traffic, internal height clearance, gantry crane capacity, floor load rating, accessibility for large vehicles and proximity to blue collar workforce.

•    Recent industrial transactions include;

o    Strata unit in Brisbane sold for $1.975 million on a net yield of 7.9% with a 5 year lease to national tenant.
o    Freehold building in Brisbane sold for $18 million on a net yield of 8.3% with a 10 year lease to international company.
o    Freehold building in Sydney sold for $11.9 million on a net yield of 9.5% with a 9 year lease to local company in B grade building.
o    Strata unit in the Central Coast sold for $2.045 million on a net yield of 7% with a 10 year lease to a company owned by Ramsay Health Care an ASX listed company.

Retail:

•    The majority of retail tenants have gross leases, where the landlord is responsible to pay all outgoings for the property. Large retail tenants typically pay a base rent plus a percentage of their gross sales / turnover above a certain threshold.

•    The value of retail commercial property investments is underpinned by three main factors; the limited supply of retail zoned land, the fact that retail developments are highly regulated, and the majority of retail income is based around essential expenditure on food and other everyday consumer goods.

•    The main factors that influence the value of retail commercial property investments is; exposure to vehicular traffic, accessibility for pedestrians and vehicles, number of car spaces, proximity of competing retail uses, number of people in the local catchment area, and the growth potential of the local catchment area.

•    Recent retail transactions include;

o    KFC restaurant in Brisbane sold for $2.4 million on a net yield of 6.4% with a 7 year lease to KFC.
o    Hungry Jacks restaurant in Sydney sold for $2.96 million on a net yield of 6% with a 3 year lease to Hungry Jacks.
o    Suburban retail centre in Brisbane sold for $5 million on a net yield of 7.6% with 8 tenants most of which were national companies on 3 to 5 year leases.
o    Woolworths neighbourhood shopping centre in the Sunshine Coast sold for $18 million on a net yield of 7.5% with 93% of the income secured by Woolworths on a 20 year lease.
o    Bunnings in the Gold Coast sold for $16.35 million on a net yield of 7.6% with a 10 year lease to Bunnings.

Specialised use:

•    The majority of specialised use tenants have net leases, where the tenant is responsible to pay all outgoings for the property.

•    Specialised use commercial property investments includes all commercial property that doesn’t fall under the main three sectors mentioned above and includes medical centres, child care centres, storage facilities, entertainment facilities, car wash facilities and service stations.

•    Typically specialised use property is designed and built to meet the specific requirements of the intended use. This generally means that the property is not easily adaptable to an alternative use which restricts the flexibility for releasing the property should a vacancy occur.

•    The main factors that influence the value of specialised commercial property investments is; exposure to vehicular traffic, accessibility for pedestrians and vehicles, number of car spaces, proximity of competing specialised uses, number of people in the local catchment area, and the growth potential of the local catchment area.

•    Recent special use transactions include;

o    Strata medical suite in the Gold Coast sold for $1.55 million on a net yield of 7% with a 10 year lease to a national tenant.
o    Service station in Sydney sold for $1.57 million on a net yield of 5.3% with a 15 year lease to Woolworths.
o    Bowling alley in Brisbane sold for $5 million on a net yield of 7.93% with a 10 year lease to ASX listed company.
o    Car wash facility in the Gold Coast sold for $2.35 million on a net yield of 8.1% with a 7 year lease to CarLovers a national company.
o    Storage facility in the Gold Coast sold for $3.85 million on a net yield of 8.8% with a 12 year lease to National Storage.
o    Child care facility in Sydney sold for $3.667 million on a net yield of 7.5% with a 20 year lease to local operator.

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