Money-saving ‘green’ features are impacting commercial buyer preferences more than rising interest rates.
Sydney (6 December 2022): Raine & Horne Commercial launches its Q4 2022 edition of Commercial Insights, providing expert views on the health of the commercial property market across Australia.
Commercial Insights confirms that lack of quality stock, demand from owner occupiers, and an increased pool of investors looking for investments with low levels of volatility, is driving the commercial property market.
Industrial property continues to be one of the best performing asset classes of the COVID-19 pandemic though as the economy rebounds, demand for retail and office space is experiencing a rapid uptick
Industrial market experiencing “all-time high” demand
Industrial property continues to surge ahead, driven by demand from owner-occupiers – often distribution-related businesses as well as those in food packaging and consumer goods.
In Sydney’s South-West, Raine & Horne Commercial experts report that demand for industrial property is at an all-time high with no signs of slowing down. Demand has benefitted substantially from the construction of the city’s second international airport at Badgerys Creek.
More broadly, demand for industrial assets is underpinned by a large cohort of buyers looking to diversify their property portfolios by acquiring commercial assets.
Mr Angus Raine, Executive Chairman Raine & Horne, said, “Owner occupiers are still aggressively seeking quality industrial assets, and we are seeing very low industrial stock levels come onto the market. In some areas, businesses need to plan 24 months in advance to find new premises.
“Many locations across Australia have little or no land earmarked for new commercial developments – especially industrial estates. We recently saw industrial land on Queensland’s Sunshine Coast sell for $750 per square metre – lots that were commanding just $300 per square metre less than three years ago.”
Rate hikes having limited impact to date
A number of Raine & Horne Commercial property experts report that investors in the sub-$5 million range are often cash buyers. This is helping to shelter the market against the impact of interest rate rises.
Mr Raine said, “Rising interest rates are expected to see yields rise in the next 12 months, particularly among retail and office assets. However, yields on industrial assets are expected to stay the same owing to high demand and extremely tight supply.”
Eco-credentials are gaining traction among buyers/lessees
Raine & Horne Commercial teams report that a small but growing number of buyers and lessees are enquiring about a building’s environmental credentials.
Mr Raine said, “Government tenants and NDIS operators are typically seeking properties that tick the boxes for environmental, social, and corporate governance (ESG) criteria. This has increased demand for modern, high quality properties that can deliver cost savings through reduced power or water consumption, or which create a more comfortable working environment for employees.
“In the office leasing market, government tenants often require a specific NABERS rating that measures the environmental performance of buildings and tenancies.
“More generally, buyers and tenants are increasingly enquiring about the ‘green’ features of a property, and this is a trend likely to gain traction as Australia heads toward net zero by 2050.”
For a copy of the Raine & Horne’s Commercial Insights Q4 2022 click here.