What scenarios can push Melbourne CBD rental prices down? (other than oversupply)
I can't think of any other reasons why rental prices would come down?
I can't think of any other reasons why rental prices would come down?
What scenarios can push melbourne CBD rental prices down? (other than oversupply)
- Thread starter Michael Birch
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- melbourne
There's a range of things that can affect rental prices:
- Location (main street, side street, ground floor, top floor).
- Amenity.
- Access.
- Parking.
- Foot traffic.
- Size (i.e. is it an in demand size, too big, or too small).
- Presence of a key tenant/drawcard.
- Layout.
- Age.
- Zoning.
So, viable scenarios for pushing rent down could include:
1. Redevelopment of premises. Construction usually discourages trade, and if there's no customers there's pressure from tenants to drop rental.
2. The same as 1, but public works.
3. The loss of a key tenant who drew customers, especially in retail, can pull down rent. Imagine a shopping centre without a Coles or a Woolworths.
4. As simple a thing as a change in parking laws, or the implementation of paid parking, can significantly decrease trade.
5. Better premises becoming available locally. While along the lines of oversupply, a new premises might be more desirable due to any number of factors. Landlords of older premises may need to discount to attract tenants back.
6. Similar to 5, the new premises may not be better - but the landlord may try to undercut the market to get some initial tenants in.
- Location (main street, side street, ground floor, top floor).
- Amenity.
- Access.
- Parking.
- Foot traffic.
- Size (i.e. is it an in demand size, too big, or too small).
- Presence of a key tenant/drawcard.
- Layout.
- Age.
- Zoning.
So, viable scenarios for pushing rent down could include:
1. Redevelopment of premises. Construction usually discourages trade, and if there's no customers there's pressure from tenants to drop rental.
2. The same as 1, but public works.
3. The loss of a key tenant who drew customers, especially in retail, can pull down rent. Imagine a shopping centre without a Coles or a Woolworths.
4. As simple a thing as a change in parking laws, or the implementation of paid parking, can significantly decrease trade.
5. Better premises becoming available locally. While along the lines of oversupply, a new premises might be more desirable due to any number of factors. Landlords of older premises may need to discount to attract tenants back.
6. Similar to 5, the new premises may not be better - but the landlord may try to undercut the market to get some initial tenants in.
The problem is, even if they wanted to put the rent down, there are consequences for doing that.... it could affect borrowing capacity, it could affect property values, and the long term rental performance history of the property.
However, there is a component of rent known as 'outgoings' and that can give them a bit of wiggle room to make adjustments to the real cost of rent without affecting above issues.
Another big one is rent with a turnover component, so when your business is more profitable, you pay more rent, when your business is less profitable, you pay less rent.
However, there is a component of rent known as 'outgoings' and that can give them a bit of wiggle room to make adjustments to the real cost of rent without affecting above issues.
Another big one is rent with a turnover component, so when your business is more profitable, you pay more rent, when your business is less profitable, you pay less rent.
Using Outgoings is fraught with danger. I'm not sure about interstate, but the Queensland Retail Shop Leases Act is very prescriptive on what can and cannot be charged as outgoings under a retail shop lease. Lessors must give annual estimates of outgoings, and an audited statement of outgoings. If you want to try to put wriggle room in there, you're going to have to get it past an auditor and the tenant.
Government policy, both state and federal can affect prices. Global economic conditions are a factor.
We're 'lucky' in Australia that we have fairly good infrastructure and plan for it reasonably well so things like reliable electricity and transport are not major concerns.
We're 'lucky' in Australia that we have fairly good infrastructure and plan for it reasonably well so things like reliable electricity and transport are not major concerns.
Are you saying things that 'can' be charged as outgoings 'must' be charged? Because if that is not your point, then i dont see the danger at all?
No, I'm saying that only certain things can be validly charged as outgoings - and those amounts have to be audited. So, you can't go hiding any amounts in there.
I was clearly talking about reducing the rent. hence why i started my sentence with this line "The problem is, even if they wanted to put the rent down, there are consequences for doing that" (reply 3)
The way a landlord can reduce the rent without affecting the rental value history of the property is by choosing not to charge outgoings he might normally be entitled to charge. So, i fail to see how it is 'hiding' amounts.
Okay, I misunderstood. I thought you were talking about reducing rent by shifting some amounts to outgoings. I don't see rent and outgoings as being the same thing - and rent amounts for retail shops aren't often quoted as including both things (at least up here).
I see, ... but yea, the whole point is to maintain the up front rental value of the property while at the same time still being able to do something to make the place a bit cheaper to the tenant
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