Dee Why commercial property sells with gains of more than $1 million a year
A commercial building in Dee Why sold for $9.5 million – picking up more than $1 million each year since it last traded.
The two-storey property on the corner of Pittwater Road and Oaks Avenue sold for $5.1 million in 2014, meaning the asset has ballooned in value by $4.4 million, on top of the $380,000 of annual rental income it earned.
Novak Properties’ Michael Burgio, who brokered the sale, attributed the strong capital growth to the gentrification of the beachside suburb.
That has been spurred by Meriton’s $300-million mixed-use development, Lighthouse, down the road, which was announced two years ago.
The corner block could be redeveloped into a six-level commercial mixed-use tower. Photo: Supplied
“Ten years ago, you wouldn’t drive through Dee Why,” he said.
“Whenever you see an iconic developer like Meriton come into an area, it changes the face but it also attracts a lot of other developers as well for those fringe (suburbs) developments.”
Set to be the tallest development in Dee Why, Lighthouse also set the precedent for denser and taller towers in the suburb, with two of its four apartment buildings to reach 17 storeys – replacing a cluster of aging low-rise commercial properties.
CBRE sales and leasing agent Toby Silk, who specialises in the northern beaches and north shore, said this “flow-on effect” gentrification has happened in nearby Balgowlah.
“When Stockland went into Balgowlah, which is the same thing we’re seeing in Dee Why, a lot of the strip retail retracted out of the strip and then went into the actual shopping centre, which is causing a lot of vacancies at present,” he said.
“But eventually, due to the number of people moving into the area from all of the residential apartments being built, there will be upward pressure for retail amenity, which will cause new tenants to move into the area, and that’s what we saw at Balgowlah.”
Mr Burgio added that the new owners, a northern beaches-based developer, is “heavily considering” a commercial mixed-use development after the existing leases end in 2020. Retail, office, medical, serviced apartments and “high-end” boarding house studios are on the cards.
“Their original planning was heavily residential for this type of property but I always felt a commercial tower or a six-level mixed-use (project) would be best here, because I know those tenants pay a premium for that exposure and the best location,” he said.
About 310 buyers made enquiries on the property and 18 requested contracts. One of the serious contenders was an overseas investor with a budget at a similar level, but was held back by the property’s low net yield of about 3.8 per cent.
“It was a very sharp yield, and it wasn’t like this was an undermanaged, underrented property which you can double the rent and get a 7 or 8 per cent yield,” Mr Burgio said.
“With financing really tightening up, it narrowed a lot of the buyers being able to purchase a property on lower yield for future benefit. A lot of banks want to see 5 or 6 per cent return to finance it, so you’ve got to be very cashed up and have a lot of equity behind you to purchase something like this.”
The 506-square-metre property fetched nearly $19,000 a square metre.
