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Q: Will single ownership buildings maintain a rental premium over strata title space?

A: Maybe – this question is subject to a number of factors. However, all other things equal, when comparing the strength and quality of rental yields for real estate under different ownership structures, it would very much be dependent upon the perception and finances of the owner or majority of owners. Any building that is well maintained always commands a premium price/rental return.

Where you have an individual owner who takes pride in the building and has both the finances and will to maintain the building, it will always command a premium to buildings maintained to a lower standard and as a result, attract a better class of tenant.

This general rule of thumb applies to all real estate and the strata title space is no exception. Under the strata title regime, all jointly owned properties must have an Owners’ Association (OA) in place and they basically control the buildings long term future by giving a clear indication on where they want the development to be positioned in the marketplace.

One important assessment is whether or not the building has a well-functioning OA, free from the many disputes that may arise due to differing factions within the OA who have conflicting interests. If the majority of owners do not want to maintain the property to a high standard and you are one of the owners who want to upgrade the presentation and general services to the building, then you have a problem and are stuck with the lower standard of presentation and maintenance.

Another issue to be considered is the size of the lots. In the case of commercial or retail space, there is greater flexibility under a single owner who is prepared to vary the size and/or adjust floor space layouts for their tenants than with a number of owners with fixed floor space lots.




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