Finance Market Update 22 October 21
The government has paid out billions in support for businesses during the pandemic, and there is one final bit of money available to businesses, but you need to act quick. In this fortnights update we talk about the final and much improved government back business loans and how and why to get one, and massive deals happening in commercial property hastening the return to the office.
The final round of government finance
Since the virus crisis started the government has spent billions to support people and the economy, but those payments are ending.
As we were all being told to stay home payments in the form of JobKeeper and JobSaver kept many people and small businesses afloat. It was a remarkable and effective policy response by the government for a once in a generation pandemic.
But the JobPayment tap is now turned off, and that could pose an issue for some businesses.
Fortunately, the government has revised and extended their ‘SME government guaranteed loans’ but they need to be done by the end of this year before that tap is also turned off.
The first iterations of these loans were a guaranteed headache, and many businesses didn’t end up getting them because they were either too hard to get or the banks couldn’t do it. But now, they are much better.
Skyward Financial can help your business obtain these loans and we have outlined key details in this update.
How it works
- Borrow up to $5 million (lending criteria applies)
- Rate from 2.60% secured from 3.25% for unsecured
- Up to 12 months repayment holiday (higher rates might apply)
- Loan terms up to 10 years
- The loan must be used for business purposes or purchase of commercial property
- Loans may be secured or unsecured
- Loans can be used to refinance existing business loans
- Have less than $250 million revenue
- Your business has been adversely economically affected by the coronavirus pandemic
- Must have an Australian Business Number (ABN) (Self-Employed and not for profit acceptable)
What these loans be used for
- Business assets (equipment, machinery, manufacturing)
- Working capital for stock, general expenses
- Business growth
- Commercial property (between 65% and 85% LVR)
- Acquiring another business
These loans can not be used to
- Purchase residential property
- Buy financial products (like stocks, bonds)
- Lend to someone else
- Lease, rent, hire or hire purchase existing assets that are more than halfway into their effective life
You can learn more about the SME Recovery Loan Scheme at the Treasury website.
If you want to know if you could apply or have questions Let’s Talk.
Return of the office
For all the talk of the office being dead billions of dollars are being invested in offices.
One of the largest asset managers in the world, Blackstone, has just signed to buy 75% of Grosvenor Place on George St in Sydney, one of the most prominent and well-known towers in the city, for $1.35 billion dollars.
That’s a big investment in so called dying asset class.
We talked about how the office is dead, long live the office in an earlier one of these updates and I said that while the future of work is unknowable the most likely outcome for the majority of workers would be 3 days in the office and 2 days working from home.
This won’t be for every business or even industry but on average I think will be broadly correct.
There will be cases, mostly in tech industries, that will move to being 100% remote working. But I’d dare say more conservative and classical industries like law and finance will stick to offices for the foreseeable future.
This does not mean that they will not have a form of flexible working for most staff, but they will continue to have offices and want to see their people in them.
In tech for example, one of the country’s biggest firms Atlassian will have a majority flexible workforce, but even they know the office is important and have just got approval to build their $1.5 billion dollar tower next to Sydney central station.
This new tower is a flag in the ground for a new tech precinct set to spout up around central and Surry Hills.
That area will become the go to destination for tech in Australia as it becomes a mini–Aussie-Silicon Valley.
In an update from August I said we will have a huge economic boom in 2022 and beyond I outlined 4 reasons why I thought this, one of which was immigration.
Rich, smart, hardworking people from Hong Kong, UK and US and Europe will see Australia as a desirable place to live and as soon as boarders open up will be flying inward bound on a one-way ticket.
Many of those people will work in tech, which means many of them will be migrating from wherever they are to the future technology precinct around central, which should validate the investment from Atlassian and the general need for more office space, even for tech firms.
According to Cushman & Wakefield’s recent report the year-to-date tally of commercial sales, including offices, industrial, and retail hit $43.6 billion. Over the September quarter, $11.5 billion in total transacted, which offices made up just over half of that total and that indicates strong demand from investors into offices.
Where there is strong demand from investors they expect strong demand from customers which means they think people will need and be returning to the office.
However, one could argue that with the increases in sub leasing and huge incentives being offered to tenants that the re-pricing of office space, particularly in A and B grade towers, and the compression on yields that will have on values, has not yet fully passed through. But right now, it seems they are resilient, and any dip might have passed already.
This could also be due to QE and the massive amount of liquidity chasing inflation hedging real world assets.
We have said before that commercial real estate is a great investment and can generate strong yield and positive cashflow so if you are interested in learning more about your options Let’s Talk.
So, from here, where to for the office?
Well, they will all probably be standing in the same spots as always and not going anywhere, it is people that will be heading back to them for work.