The Australian market is somewhat unique, with A REITS owning the majority of the commercial carparks in capital cities and their secondary markets, including North Sydney, Parramatta and Chatswood. They usually require a lease from an independent entity to conform to tax laws relating to trading trusts.
Not only have property prices surged over the past decade with prime yields in Sydney and Melbourne firming by over 30%, but parking rates have also increased, especially in the hourly casual categories creating an expectation of continued revenue and rent increases. But there is a disconnect here which I will go into in greater detail later.
The large office tenants of the REITS have been very good at reducing their space requirements per person from around 1:15 to 1:10 (or even lower) over the past decade. To do this they have borrowed an innovation from the parking industry – the unreserved overlet, which was developed by Laurie Wilson in the 1960’s, and renamed it "agile working". The tenants have taken this to a new level using data from employee’s occupancy within the tenancy to have a complete understanding of use and movements within tenancies.
Eureka moment for ParkScience
The majority of my work centres around carparks, their design and access systems.In recent times a new string has been added to the bow, with ParkScience engaged by Wilson Parking to obtain development approval for a two level 4,000m2 office to be built on top of the successful 602 bay Eureka car park adjacent to SouthGate in Melbourne.
Rents in and around the Melbourne CBD have increased rapidly in the past year with gross rents at $1,200m2 at the bottom end of Collins Street and the now fashionable Cremorne “tech area” seeing rents push towards $650m2. On top of this yields continue to fall.
This has opened an exciting opportunity to create a unique office development adjacent to the CBD that will have excellent natural light, easy access, new private lift and lift lobby and plenty of parking!
Following the last newsletter on history never repeating, WeWork’s IPO has been cancelled and SoftBank have had to inject further funds into the business as investors shied away from the top line growth strategy.
It has been an interesting rollercoaster for We Work since its commencement in 2012 with the valuation moving to $10 billion in 2016, then to $42billion in January 2019 and now down to $8 billion – which still looks very optimistic for a company that lost $900 million in the first half of 2019.
And the winner is WeWork’s founder, Adam Neumann who will walk away with around $1.7 billion including a $500m credit line. Imagine the payout if they had made a profit!.