Three old adjoining shops for sale on Sydney’s north shore with no current development application approval in place have smashed their reserve price at auction by more than 33 per cent after a bidding war between eight buyers.
The $8,925,000 sale price for the 778-square-metre site in the heart of Lane Cove village has astonished locals, and set a new record in the suburb for a site with no DA approval. According to a concept scheme for the site, for a three-level building of 14 units with retail space, this equates to an potential per unit site value of more than $530,000.
“Anything that has a residential flavour to it is running hot,” said director of PropertyFox, Tim Fox, the agent who sold the butcher’s, the book store and a vacant former toy shop on Burns Bay Road.
“A lot of developers are still hungry for sites and we’ve had a lot of interest from both local developers and Asian developers.
“Their appetite for old commercial property on the lower north shore is unquenchable. These shops were old and rundown and they’re now part of the urban renewal process to turn them into new residential with commercial space.”
Neighbours, in turn, have been astounded by the sale in Lane Cove, to a local developer whom agents have refused to identify.
“We were amazed at that price,” said Gus Kernot, director of O’Connors Property Reports, who owns an office in a neighbouring commercial block. “It shows that the consolidation of sites dramatically increases their value, especially when so many of the individual subdivisions in this area are long and narrow and so are completely inflexible.
“We’re obviously now comparing the value of our 560-square-metre site with the value of the one sold, and looking how further consolidation would increase the value of both, imagining that council would be enthusiastic about that, rather than having a real mish-mash of different buildings.”
Already a row of seven shops on the other side of those that just sold has been offered for sale by Colliers International.
The resurgence of activity north of the harbour was being driven by big rises in land tax, Mr Fox said. With a lot of commercial property in the area leased on gross terms, returns for businesses were being dramatically cut, so companies were quitting and the owners were keen to sell to developers to make the most of the uplift in land prices.
“They can’t improve their returns, so they exit and sell to a developer and reinvest their capital elsewhere,” said Mr Fox, who has two more sites coming up, another office building in St Leonards without an approved DA, and a restaurant with an approved DA for 12 units. “Skyrocketing land tax means people are being compelled to sell,” he said.
His PropertyFox colleague in North Sydney, Lachlan Worthington, said demand for commercial property was at an all-time high in his area, too.
He auctioned a 141-square-metre office in a building with harbour views at 12 Mount Street last week for $1.12 million, equating to $7943 a square metre, which broke the building record for the second time in six weeks. Even the previous record of $7660 a square metre was well above the 2016 top sale at $4969 a square metre.
“We’ve seen rents increasing by so much, tenants are preferring to become owner-occupiers because it’s safer,” Mr Worthington said. “So there are a lot more buyers in the market and not much supply.
“With residential development, rezoning and the compulsory acquisition of multiple north shore and Sydney CBD properties – approximately 27,600 square metres of stock is slated for demolition in 2017, some to make way for the new Victoria Cross train station in North Sydney as part of the Sydney Metro project – the displacement of tenants and owner occupiers is bringing demand to an all-time high.”
He said a number of companies were making good use of this stellar market. Jacobs, Goodman Fielder and Vodafone had recently relocated and consolidated into North Sydney, while Leighton Holdings consolidated from 11 buildings across Sydney. In addition, Channel 9 had announced its move to North Sydney from Willoughby, occupying the 60,000 square metres of Winten Group’s 1 Denison, scheduled for completion in early 2020.
There was also a lot happening around Crows Nest and St Leonards, said Andrew Learmont of Kennedy Learmont. The main drivers had been new infrastructure going in, such as that Metro rail, and changes in floor-space ratios by councils and the state government.
“You’ve got a lot of people jostling for positions around Crows Nest, particularly by the new station entrance, and St Leonards, since it’ll have two stations in the future,” Mr Learmont said. “They’re the biggest winners.
“Also, there’s a lot of activity around the northern end of North Sydney on the end of Miller Street which is also really benefiting from the proposed station entrance near the council chambers. Developers are also buying into older-style strata residential buildings to take advantage of the strata changes where 75 per cent of owners can vote to sell to developers. If they own 25 per cent, they can have a strong voice at the table.”
Even with the new redevelopment going on to convert or rebuild to residential, the new planning rules that mean there have to be certain floor-space ratios of commercial and retail going back into the sites safeguard site activity and employment opportunities. The employment zone from the airport to North Ryde and Norwest business park at Baulkham Hills is also sustaining interest.
“In 32 years in the commercial property market, I’ve never seen the market going so strongly,” Mr Learmont said. “There’s been no pause; it’s like two cycles going on back to back.”
Tim Grosmann, director capital transactions at Savills Australia, also has some office buildings in North Sydney coming up on the market which he feels will be redeveloped into residential, with retail and commercial space. “We’ve had good interest,” he said.
“North Sydney is a little bit behind the Sydney CBD but if you can’t get office space in the city, then North Sydney is one of the options.”
North Sydney-based Henry Burke, director investment services for Colliers International, has also had some sites on the market, including at Artarmon, and says rezoning has really pushed demand for sites.
“As well, interest rates are low and housing affordability is at an all-time high, and there’s a lot of interest from Asia, especially China, and then Hong Kong and Singapore. There’s just so much potential for development, and sales well over the commercial value.”