TILTTalk.

SPRING 2015 VOLUME 3

A Fresh Slant on Commercial Property

www.tiltcommercial.com.au

For further information contact: Tilt Commercial T 08 9445 2330 Suite 9, 5 Hasler Rd, Osborne Park WA 6017

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WEATHERING THE STORM The commercial property market in Perth is currently going through a rough patch with enquiry levels for a variety of building types and sizes significantly down from previous levels. With the downturn in the resources sector many companies have been forced to restructure their business and cut costs to weather out the storm or to even just stay afloat. In this issue of Tilt Talk we look at the current market outlook and measures that property owners can take to retain their tenants, maintain their investments and minimise the cost of tenant defaults.

Tilt Commercial are pleased to announce their involvement in another exciting new development by the Giorgi Group. The new development on the corner of Great Eastern Hwy and Belmont Ave has been designed to accommodate a combination of showroom, office and medical suites to meet the current market demand. This unique design has attracted the attention of high profile International businesses looking for a high exposure location for their brand.

The site is only 5km from the Perth CBD and International airport. At present Tilt Commercial is negotiating with a number of medical users that will occupy 3 out of the 4 units available.

For any further details please contact Craig Cairns.

PROJECTS

MARKET OUTLOOK Find out what trends have influenced the commercial, industrial and retail property markets over the last year and what lies ahead.

THE IMPORTANCE OF ASSET MANAGEMENTDifficult times, difficult measures.

PROJECTS The focus is on Forest Lakes Commercial Centre and ID Offices and Medical Centre, Belmont.

TILT COMMERCIAL’S NEW TEAMTilt Commercial welcomes a new member to the team.

OUR SOCIAL SCENEWell done Craig and Sarah.

TALK AROUND TOWN

Belmont ID - 153 Great Eastern Highway

2015/16FYMARKET OUTLOOK

Forest Lakes Commercial Centre

Over the Last 6 months Tilt Commercial has been involved in the off the plan sales of 8 strip shop units on behalf of emerging development group Q Design Construct and the Peritas Group. This brand new development, located on the corner of Geographe Way and Garden Street in Thornlie was the last remaining piece of the previously developed Forest Lakes Lifestyle Village.

Construction of the project on the 2,400m2 site will commence shortly after 5 of the 8 units are already under contract. The development will include a dedicated café unit and 7 shop units that can allow for a variety of uses including office, medical consulting, small retail and food services.The development has attracted a huge amount of interest and will likely be completely sold out prior to completion. Unit sizes range from 70m2 – 135m2 with the ability to join units together to create larger tenancies. Each unit will be completed to a high commercial standard and is set to deliver much needed amenity to the local community.

For any further details on the site please contact Adam Yeo.

Due to our ongoing success Tilt Commercial has recently expanded and would like to welcome Brenton Tieleman to the team as a Property Manager. Brenton joined Tilt in December 2014 and brings a wealth of experience to ensure that our growing management portfolio is well managed for each of our valued clients.

WELCOME ABOARD

The team at Tilt Commercial would like to congratulate Craig and Sarah on their recent race at the Ironman 70.3 World Championships. The race was held in Zell am See in Austria and was the first time in history the World Championships has been held outside the United States. They competed against 2,500 of the best athletes from all over the world on an extremely challenging course.

Well done guys, you are inspirational!

Commercial

Industrial

Retail/Bulk Goods

Difficult Times, Difficult Measures - The Importance of Asset Management

2015 has been a turbulent year with large amounts of office space, both small and large, coming to market. A number of new office towers began construction over the last 2 years with many new A grade buildings currently available with additional supply still to come. With new supply on the market at extremely competitive rates, many businesses have used the opportunity to upgrade to better facilities for similar rates to what they were paying in B or even C Grade facilities. The Perth CBD and city fringe areas including West Perth and Subiaco have been hit the hardest. With an oversupply of stock, in just about every size category these typically B & C Grade buildings have been vacant for 6 – 12 months already with no reprieve likely within the next 12 months.

Property owners should be mindful when approaching rent reviews and lease expiries and ensure that competitive rates are proposed to tenants to encourage them to stay and extend their current lease.

The Perth industrial property sector has slowed considerably in 2015 after a long period of strong stability and resilience to external market forces. The downturn in the resource sector has had a profound effect on many businesses with a multitude of medium – large properties becoming available due to companies contracts expiring or downsizing.

Tenants and purchasers looking for new space have an abundance of quality stock available to choose from in certain areas and size categories while others remain tightly held. A greater number of leased investments between $3 - $10 million have hit the market in 2015 with good returns but investors should be aware of over inflated rentals especially on Sale & Leaseback properties.

Owners should ensure they keep their building in good condition with regular scheduled maintenance agreements in place to ensure their properties are attractive to the market when they come to their lease expiry.

The last 12 months has shown a dramatic shift in consumer and business confidence nationally, but more importantly, here in Western Australia. The state has been affected by a number of key factors, with the main one being the drop in the iron ore price and downturn in general across the resource sectors. This has had a major knock-on effect to a large number of Perth based companies that support these sectors. Businesses have been forced to restructure and downsize where possible to stay afloat and in some cases this just couldn’t happen fast enough.

Here in lies the importance of good asset management to assist in negotiating through the tough times with tenants and take appropriate action when required. Tilt Commercial ensures a close relationship with tenants within our portfolio which allows us to identify early on when businesses are struggling with their financial obligations and then take appropriate steps to either manage the situation or bring the tenancy to an end before significant costs are incurred by the owner.

There is no hard and fast rule when dealing with tenants in default as every situation is different including an owners’ position. Tilt Commercial will work with tenants through payment plans to correct any rental arears to achieve a satisfactory outcome for all involved. Unfortunately this can’t always happen and serious steps may need to be taken to default tenants and retake possession of the property. It is in these situations that the knowledge and experience of good commercial managers comes into its own. Tilt Commercial is highly experienced in this field ensuring the legal rights of owners are upheld and costs are recovered.

The retail and bulky goods sector is showing some positive signs this year with small – medium units being leased within a relatively short period. Larger properties of 500 – 1,200m2 are taking longer to lease (typically 6 months) with larger retailers taking a cautious approach with plans to expand to new locations.

With the continuing emergence of online shopping it is becoming evident that many of the smaller showroom retailers no longer require the exposure of main roads and can quite comfortably trade from properties on secondary roads with considerably cheaper rents.

Tilt Commercial has recently negotiated a number of new showroom lease transactions within the Osborne Park and Cannington areas.

Listed for your benefit are our staff positions.

Adam Yeo – Principal / Director

Craig Cairns – Director

Jo Piper – Trust Accounts / Office Manager

Brenton Tieleman – Property Manager

Toni Yeo - Accounts

Tilt Commercial’s New Team

WELL DONE CRAIG & SARAH