The strength of government leases in commercial properties

Thursday 9 May 2019

The inherent strength of government leases at commercial properties will be laid bare once more when three high-performing office assets are auctioned this month.

Government-leased properties in Launceston, Tasmania, South Morang in suburban Melbourne and Shepparton in regional Victoria will all be on the block at Burgess Rawson’s Investment Portfolio Auction on May 15.

The property, just south of Launceston, represents one of the most significant government-tenanted offerings to be brought to market this year, with net annual rent of more than $504,000.

The facility, which is leased to the Tasmanian State Government is utilised by the Tasmania’s Department of Primary Industries, Parks, Water and Environment, and the Department of State Growth, is positioned in a strategic location among other State Government-owned office and laboratories.

Occupying a major 16,330 sqm landholding with 3,992 sqm of buildings, including a brand new 550 sqm warehouse storage facility along with 101 car spaces, the property is leased to the Tasmanian Government until 2028, with further options.

Burgess Rawson director Shaun Venables, who is marketing the property with Beau Coulter in conjunction with Knight Frank, said government leases provide long-term certainty for investors.

“Government-leased properties always find an audience among investors, as their tenancy profile is as safe as it gets,” Venables said.

“And that’s never been truer than in Launceston, which is riding a wave of interest in both its commercial and residential markets, while landlords are reaping the benefits of Tasmania’s record low office vacancy rates.”

Meanwhile, an enticing potential yield is on offer for a two-level Shepparton office building leased to the government-funded Primary Health Network.

The property at 100 High Street is anchored by PHN Murray, with digital marketing agency Attention Media occupying the rest of the property on a second lease.

Burgess Rawson agents Jamie Perlinger and Beau Coulter, along with Gagliardi Scott Real Estate’s Scott Gagliardi, anticipate a high yield of between 9% and 10% for the prominent 470sqm Commercial 1-zoned site, which has 10m of street frontage, dual access and seven secure car parking spaces. It currently returns $80,594 per annum.

In the key growth area of South Morang an office anchored by the Department of Justice is also to be auctioned.

The quality first-floor office at Lots 5B and 9-11/545 McDonalds Road spans 936sqm and has lift access, along with an impressive high security tenant-supplied fitout and fixed annual 3.5% increases.

Offering 28 metres of street exposure to busy McDonalds Road, the State Government department is on a secure five-year lease to 2021, with a further 10 years of options, while a successful beautician clinic also leases part of the property. The two tenancies currently return a combined $180,134 per annum, with built-in rent increases of between 3.5-4%.

The three properties will be auctioned at Burgess Rawson’s Investment Portfolio Auction in Crown Casino’s River Room on Wednesday, May 15 at 11am.

To find out more about the properties in our portfolio, and how we can help you with sales, leasing and property management services, please contact us.