Raine & Horne Commercial launches its Q2 2021 edition of Commercial Insights, providing expert views on the health of the commercial property market across Australia.
Commercial Insights confirms that the commercial property market is being shaped by the ‘perfect storm’ of supply and demand forces.
On the demand side, historically low interest rates are making it cheaper for many businesses to own rather than lease their premises. Demand is further supported by investors chasing strong yields especially in the thriving industrial property market.
In terms of supply, the commercial property market is facing a retraction of stock following the conversion of many former industrial assets to residential properties, coupled with a lack of new industrial developments. This is creating a significant undersupply of listed properties, which is driving commercial values higher and tightening vacancy rates in many areas.
Industrial assets in high demand
Market conditions are particularly buoyant across the industrial property sector. As a guide to the level of buyer interest, an automotive workshop at 2 Young Street, Redfern was recently sold at auction by Raine & Horne Commercial Inner West/South Sydney for $2.96 million plus GST. With mixed use zoning and a land area of 363 square metres (sqm), the sales campaign attracted over 200 logged enquiries and 14 contracts were issued.
The growing numbers of SMEs choosing to invest in their own premises, is creating a shortage of industrial properties available for lease. This is pushing rents higher and leading to vacancy rates at near-zero levels. In Sydney’s Campbelltown region, Raine & Horne Commercial Macarthur managed the sale of 31 Lasso Road, Gregory Hills, an 8,500sqm mixed use strata development, which was sold and leased out prior to the occupation certificate being issued.
Strong buyer interest isn’t limited to Sydney. Regional markets are also faring well, driven by interstate investors, affordability and buoyant local economies, which have experienced low rates of COVID.
As evidence of the health of regional markets, Raine & Horne Commercial Port Macquarie recently sold 20 Fernhill Road, Port Macquarie for $1.83 million with vacant possession. Situated on a 3,414sqm lot, the factory premises include office and residence, with total warehouse area of 1,600sqm plus a mezzanine floor area of 158sqm.
Office space rebounds
Across the Raine & Horne Commercial network, agents are reporting a rebound in the office market as businesses transition to a blend of flexible work arrangements that include telecommuting.
Regional locations in particular are seeing a rapid return to normal market conditions. In the New England region of NSW, Raine & Horne Commercial Tamworth managed the sale of 522 Peel Street, Tamworth for $1.5 million. The property features 1,808sqm of commercial land with a large 909sqm office complex. With two solid tenants including the NSW State Government, the property is returning a net of $137,000pa.
Angus Raine, Executive Chairman Raine & Horne Group, says, “We are seeing the ideal blend of conditions in the commercial property market right now. Interest rates are at historic lows, the economy is rebounding sharply, and investors – including self-managed super funds, are seeking assets with the potential to deliver stable yields and steady long term capital growth. It all adds up to make commercial property very attractive, and in the current market, industrial assets are the jewel in the crown.
“The key challenge buyers face at present is a shortage of listed stock. This makes now the ideal time to sell a commercial property for those investors seeking alternative opportunities,” concluded Mr Raine.
For a copy of the Raine & Horne’s Commercial Insights Winter 2021 click onto this link.