Australian commercial property markets primed for take-off this spring

Media release - 7th September, 2016

  • North Sydney – commercial vacancy rates are heading towards 5.0% - the lowest since 2001.
  • Parramatta – investors are achieving yields of 6.0% on retail assets and 7.5% on office space
  • Penrith – the announcement of Badgerys Creek as Sydney’s second airport has redefined Penrith’s commercial market based on land value speculation.
  • Campbelltown – properties that were selling for $1,300 per sqm 12 months ago are now commanding $2,000 per sqm.
  • Newcastle – 50% of commercial properties in the sub-$2m market are selling prior to auction.
  • Brisbane – demand among SMSFs for commercial assets is ten times stronger than supply.

The Spring 2016 issue of Raine & Horne Commercial Insights has found a trifecta of factors – comprising low interest rates, a supportive Federal government and lacklustre returns on many other investment classes – is driving significant interest in commercial property assets across Australia.

Raine & Horne Commercial Insights - Spring 2016“Today’s low interest rates make now the ideal time to review commercial portfolios and add new assets,” said Angus Raine, Executive Chairman, Raine & Horne Commercial.

“Small business owners are well-placed to take advantage of the current favourable market to step into their own premises, or upgrade business premises, and strengthen their enterprise’s asset base.”

In Sydney, vacancy rates are approaching 5.0% in North Sydney as commercial properties are increasingly redeveloped for residential housing. The Northern Beaches is also experiencing exceptionally low vacancy rates.

“Yields of 5-7% are achievable on the Northern Beaches, and the construction of Dee Why town centre will further cement Dee Why as a true commercial hub,” said Mr Raine.

Parramatta, in the City’s west, is experiencing near-zero vacancy rates on prime office space as blue chip government tenants including the NSW Department of Education move into the area.

“We’re seeing yields are as high as 7.5% on Parramatta office space,” said Mr Raine.

In Penrith, the announcement that Badgerys Creek will definitely be the site of Sydney’s second international airport has seen yields become irrelevant to buyers.

“Unless long leases are in place, Penrith buyers are almost exclusively looking at the value of land and its development potential,” said Mr Raine.

In the Macarthur (Campbelltown) area, Mr Raine noted, “The commercial market is being driven by owner occupiers, who are taking advantage of low interest rates to move into their own premises. In the sub-$5 million market there simply aren’t enough properties to meet demand.”

In the Hunter, Newcastle vacancy rates for office and retail space, especially in the smaller size ranges, have tightened dramatically as the city’s microbusinesses take their first growth steps.

“Auction is the preferred sale method for the Newcastle market right now, and around 50% of commercial properties in the sub-$2 million price range are selling to investors prior to auction,” said Mr Raine.

In Brisbane, demand from self-managed super funds (SMSFs) is driving up prices for commercial assets in the city’s north.

“There is a lack of quality secure industrial and retail property investment opportunities, with demand from SMSFs ten-fold stronger than supply. Securely leased investments priced between $2m-$5m are attracting 70-100 enquiries during the course of a sales campaign, and can sell on yields of 5.5-7.5%,” said Mr Raine.

The commercial market is also showing similar robust growth across many other parts of Australia. In Adelaide the Torrens Road to River Torrens South Road Upgrade Project is redefining commercial property opportunities by improving transit flows, and in Melbourne, vacancy rates remain minimal with yields in the order of 5.0-7.0% across the city.

For more information on Australian commercial property markets, download a copy of Raine & Horne Commercial Insights.

About Raine & Horne Commercial

For more than 130 years, Raine & Horne has been assisting Australians achieve their property objectives. Since its launch in 1984, Raine & Horne Commercial has been an active market participant and is now the largest commercial property group in Australia, with over 35 offices servicing every state capital and key regional growth centres.

It is a full-service commercial real estate network with a broad suite of commercial, industrial and retail property services including sales, leasing, consulting, business broking, business recovery & insolvency, facilities and asset management services.

-ENDS-

For further media information contact:

Angus Raine, Executive Chairman, Raine & Horne Commercial on 0409 920 697

Andrew Harrington, National Communications Manager, Raine & Horne on 02 9258 5400