Commercial property soars as investors seek strong returns
A rebounding economy is driving demand for retail and office space, while vacancy rates on industrial property are at historic lows.
Sydney (21 July 2022): Raine & Horne Commercial launches its Winter 2022 edition of Commercial Insights, providing expert views on the health of the commercial property market across Australia.
Commercial Insights confirms that industrial property right across the nation is proving to be one of the best performing asset classes of the COVID-19 pandemic. As the economy rebounds, demand for retail and office space is experiencing a rapid uptick.
Industrial market experiencing “unprecedented demand”
Industrial property continues to surge ahead, driven by demand from owner occupiers and investors, coupled with a significant undersupply of properties available to lease or buy.
As a result, a number of Raine & Horne Commercial Property experts report an increase in off market sales and intense buyer competition for properties listed for sale at auction.
Raine & Horne Commercial Inner West/South Sydney managed the sale of 29-31 Alfreda Street, Coogee – a 2,208 square metre prominent freehold building across four levels. The sales campaign attracted over 256 enquiries and 43 contracts were issued before sale at auction for $16.8 million.
In regional areas, investors are benefiting from robust returns on industrial property. Raine & Horne Commercial Tamworth secured the sale of an investment site at 82 Brisbane Street, Tamworth for a 7% net return.
Mr Angus Raine, Executive Chairman Raine & Horne, said, “With few new industrial developments in the pipeline across Australia, the strength of industrial property appears likely to continue for some time. We are seeing unprecedented demand drive near-zero vacancy rates for industrial assets in many areas. This is encouraging small businesses to invest in their own premises, adding further demand to an already buoyant market.
“This is underpinning double-digit growth of industrial property values in some areas, as owner occupiers compete aggressively for the limited stock available, often outbidding investors.”
Office market rebounds
Office markets are experiencing renewed demand as teams make a return to formal workplaces. It is a trend that is also expected to underpin growth in CBD retail markets.
Hobart is recording vacancy rates across the office sector as low as 2.7%, while further north on Queensland’s Sunshine Coast, Raine & Horne Commercial experts report the supply of office properties to lease or buy is at record lows.
As a guide to the strength of the market, Raine & Horne Commercial Penrith recently managed the lease of 1,406 square metres at Werrington Corporate Centre – one of the largest commercial office lease deals ever reported in the Penrith LGA.
Mr Raine said, “The pandemic has impacted the office space over the past two years. However, as businesses return to more normal operating conditions, we can expect to see rising demand as companies that initially downscaled their office footprint seek greater space to accommodate growing workplace teams.”
Retail renewal as new businesses flourish in traditional spaces
While the growth of online retailing was expected to impact the retail property market, Commercial Insights reveals that demand for retail space is recovering across both capital city and regional areas as consumers re-embrace bricks and mortar retailing.
Raine & Horne Commercial Brunswick, Victoria managed the sale of 787 Sydney Road, Brunswick – a retail premises that sold for $4.5 million with vacant possession to an owner occupier.
In New South Wales, Raine & Horne Commercial Wagga Wagga secured the sale of 80-84 Baylis Street, a multi-tenanted retail building for $3.95 million.
Mr Raine said, “There is no doubt that after several years of intermittent lockdowns, Australians are wasting no time making a return to in-person shopping, which is driving renewed demand for retail space. In addition, properties that have traditionally been used as retail shop fronts are now being transformed into nail salons, boutique gyms, galleries and event spaces as well as cafes.
To illustrate the appeal of operating from a traditional shop front, Raine & Horne Commercial has launched offices in Newcastle Canberra, Melbourne, and Townsville in 2022.
“As demand rebounds for retail properties, we are seeing a rise in buying activity among foreign investors, which is adding to competition from local buyers.”
“As we enter a new – and for many Australians – unfamiliar environment of rising interest rates and inflation, I fully expect commercial property to become an even more sought-after asset as investors seek tangible assets.
“In recent years we have seen reports of investors losing money to cryptocurrencies, or experiencing the volatility of uncertain sharemarkets. Not surprisingly, commercial property continues to be an attractive investment offering an appealing combination of healthy yields, long leases and attractive cashflows,” concluded Mr Raine.
For a copy of the Raine & Horne’s Commercial Insights Q2 2022 click here.
For further media information contact:
Angus Raine, Executive Chairman, Raine & Horne Group on 0409 920 697
Olivia Rowe, Content & Communications Executive, Raine & Horne Group on 0432 113 569