Marina Berths still proving investment potential

by Jeni Bone on 1 Feb 2011 In tempestuous economic seas, marina berths have proven their worth as a popular investment option with boaties and those less inclined to boat but are astute investors.

'The demand for berths is up and there just aren’t enough available,' explains Peter Hobbs, Sales and Marketing Director of Meridien Marinas –Australia’s largest marina developer, owner and operator with marinas located in Port Douglas, Airlie Beach, the Gold Coast and Sydney.

'Marina berths are already in short supply and the reality for boat owners is they need to decide not only what type of boat they want, but where to moor it.'

While many real estate and stock market investments have run aground during the global financial crisis, the marina market has performed against the tide by posting strong capital growth, high occupancy rates and rental returns.
The growth in demand for marina berths outweighs supply and the gap is growing, placing investors who act swiftly in an advantageous position.

'Marina berths are a popular investment option due to strong rental income and low vacancy rates with rents increasing by over 5% per annum,' adds Hobbs.

According to National Property Research with minimal new marina supply entering the market across the eastern seaboard, the end result will be that supply remains constrained whilst demand continues to increase.

Aiding in the diminishing number of marina berths is the severe restrictions by the Environmental Protection Agency for developing marinas. The Queensland Environmental Protection Agency has very stringent environmental policies in place which govern the future developments of marinas an recently has rejected a number of applications for new marinas, which creates scarcity in the market.

In NSW, a statewide Boat Ownership and Storage report published last year by NSW Maritime illustrates growth forecasts up to 2026.

Neil Patchett says the report aims to help organisations in NSW plan for increased growth in the recreational boating sector. 'The information is valuable for industry, Councils, stakeholders, the private sector, developers. It shows participation figures are on the rise, and that there will be challenges of storage on land or afloat to meet them.'

The report uses two methods to forecast growth. The first is linear projection and estimates the number of recreational boats each year up to 2026 based on the average compounded annual growth rate (2.9%) experienced across the State in the period 1999–2009. This projection method estimates that in 2026 the number of registered boats in NSW will have grown to 351,113.

The second method is based on the proportion of the population who are boat owners and population forecasts to 2026 from the Australian Bureau of Statistics (ABS). Using that method, it is estimated there will be 334,470 recreational boats registered in NSW in 2026.

'Either way, NSW faces a significant boat storage challenge, and there is room for optimism in the boat storage sector of industry,' says Patchett, referring to opportunities for development.

Darren Vaux Chairman of Boating Industries Alliance and Director at Empire Marinas, Bobbin Head - Marina of the Year in 2009 – oversaw the facility’s massive, multi-million dollar redevelopment in 2008. It now boasts 200 deepwater berths, 10 moorings, large hardstand, 50 tonne travel lift, full on-site trade services, water, gas, fuel, provisions and café in the unique National Park environment of Ku-ring-gai Chase, 24kms north of Sydney.

As Vaux recounts: 'We then proceeded with the first release of marina berths on 25-year lease terms, just 20 of them, and oriented toward the boat owner rather than investors. We wanted them to be attractive to people who want to secure their long term location within a National Park.'

Two years on, there are only two remaining – a 20m berth for $475,000, and 25m berth at $800,000. The terms are 25-year leases, renewable subject to approval by National Parks.

'From the boat owner’s point of view, they are securing their own future, considering the chronic lack of supply especially in Sydney where there is a limit to potential development. Investing in marina berths goes some way to quarantining yourself to these market forces, and you can choose sell at a time that will deliver capital gain.'
Vaux continues: 'In Broken Bay specifically, 155 to 344 boats will be looking for on-water storage every year for the next 15 years, and net supply is zero. It’s a real issue. If you’re in the boat storage business, that is a good thing. But these are barriers to getting in to boating.

In Qld, stats from Queensland Transport state there were 780,000 boat registrations in Australia as at 31 January 2010, of which Queensland makes up 30% with 233,862 registrations.

Queensland’s boat ownership is growing at 2% per annum (Queensland Transport 2010), indicating the Sunshine State can rightly claim the title of boating capital of Australia, with one in 22 Queenslanders owning a boat.
Marine Queensland states that there could be at least eight more marinas in Queensland to cover the short of supply in marina berths.

'Owning a marina berth at any of Meridien Marinas 5-star, fully integrated marina villages represents an unrivalled investment opportunity, with huge potential for capital growth and significant rental income thanks to growing demand and limited supply, as well as significant tax benefits,' says Peter Hobbs from Meridien. 'Recent financial market volatility makes the case for property, including marina berths, even more compelling.'

Meridien Marinas has recently settled nearly $20 million in marina berth sales, with both investors and boat owners securing berths.

On the Gold Coast, Meridien Marinas Horizon Shores 12m Multi-hull berths saw rental growth of a record 21% as at February 2010 (Midwood Report: Wet Berth Analysis).

'The number of boaties in South-East Queensland has exploded and with the State Government’s legislation restricting the development of any further canal sub-divisions or marinas the pressure on the available supplies is just enormous,' says Meridien’s Peter Hobbs.

Meridien Marina’s Port of Airlie marina in Airlie Beach is one of the few new marinas in Queensland and took over 20 years to gain local, state and federal approvals.

'In our experience, some investors have purchased two or three berths in Meridien Marinas’ locations instead of securing a typical house or apartment as an investment property. One of the main motives has been the significant tax advantages associated with marina berths as 100% of the berth price can be amortised over 10 years.'

Meridien Marinas also offer a 7.68% NET guaranteed return for three years on marina berths purchased in the Port Douglas, Horizon Shores and Abel Point marinas. Berths are sold on a long-term leasing basis such as 10, 15 and 20 years.