Breaking news and updates daily. Subscribe to our Newsletter!

Home of the REB Top 100 Agents
Breaking news and updates daily. Subscribe to our newsletter

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

What commercial investors are eyeing at the $2m mark

By Juliet Helmke
28 April 2022 | 1 minute read
Vanessa Rader

Commercial properties have become an increasingly popular asset class, and that uptick in competition has brought with it significant changes to the market.

Low-interest rates, availability of funds due to emerging new lenders, and sky-rocketing residential prices have all recently prompted investors to pivot from residential towards commercial purchases, according to Ray White Commercial’s head of research Vanessa Rader.

“With this increase in demand for these assets, many investors are quickly being priced out of the market, with new lows in investment yields keeping capital values elevated,” Ms Rader explained.

At the $2 million price point, the commercial asset an investor might have been able to access two years ago, pre-pandemic, is now likely out of reach. Even as vacancies accrued in office and retail, investors appeared to trust in the hardiness of the market, buying in force.

“While some markets have been impacted by COVID-19, such as office space and retail, this hasn’t dampened demand to buy, with many seeing the pandemic as a small blip in the investment cycle,” Ms Rader said.

Meanwhile, other markets received a boost off the back of pandemic-prompted shifts.

“Assets like industrial property have been hotly contested given its strong performance, while other assets like childcare, fast food, medical, and service stations remain fan favourites,” she added.

But that doesn’t mean that opportunities at the $2 million mark have disappeared. Here’s what investors have recently been eyeing at that level.

Sydney CBD strata offices

“This asset has had a long history of stagnation, but over the last five years there’s been strong capital value growth which hasn’t wavered during COVID-19,” Ms Rader said.

The network has seen continued demand at the higher end of the market from both offshore and domestic investor groups, funds, and trusts that indicate the long-term strength of this asset class remains steady.

“Across strata, both investors and owner occupiers have been eagerly competing for the limited assets available. Current average capital values stand at a little more than $14,000 per square metre, and the average sale price is just over $2.1 million,” Ms Rader said.

With $2 million in hand, investors are looking at acquiring office suites sized roughly 150 square metres in Sydney.

Perth industrial

Industrial assets have been the stand-out performer during COVID-19, and Perth in particular has grown in popularity as a location for investing.

“More recently, the strength in the state’s economy has resulted in interstate buyers converging on the various Perth commercial markets,” Ms Rader noted.

But the city, along with the other capitals, offers plenty of room for investors, ranging from warehouse units in the $500,000 and under price range up to multimillion-dollar distribution facilities.

Under $2 million, investors will be looking at smaller, new industrial unit developments on the lower end to modern freehold investments close to that price point.

Medical and healthcare assets

Savvy commercial investors have identified this sector as a growth area, with increasing desire for space in sectors such as sports and cosmetic medicine, according to Ms Rader.

“During COVID-19, increased need for pathology saw buyers pounce on this sector of the market, looking to capitalise on high occupancy and growing rents,” she said.

High population growth states such as Queensland, Tasmania and Western Australia have the greatest potential in Ms Rader’s eyes, but investment potential is strong across the country.

“In the $2 million price range, smaller medical suites can be purchased with larger facilities also possible in some locations,” she said.

What commercial investors are eyeing at the $2m mark
Vanessa Rader reb
lawyersweekly logo

Tags:

ABOUT THE AUTHOR


Juliet Helmke

Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.

Never miss a beat with

Stay across what’s happening in the Australian commercial property market by signing up to receive industry-specific news and policy alerts, agency updates, and insights from reb.

Subscribe to reb Commercial:

Rankings
rankings
JUST RELEASED
May 09, 2022

REB Top 50 Women in Real Estate 2022

REB is thrilled to present the Top 50 Women in Real Estate 2022 ranking, which sets t ... LEARN MORE

rankings
JUST RELEASED
May 04, 2022

REB Top 100 Agents 2022

Now in its second decade, the REB Top 100 Agents 2022 rankings are the most revered s ... LEARN MORE

rankings
JUST RELEASED
May 02, 2022

REB Top 50 Agents NSW 2022

Even a pandemic has not put the brakes on the unstoppable property market in NSW, whi ... LEARN MORE

rankings
JUST RELEASED
April 27, 2022

REB Top 50 Agents VIC 2022

The COVID-19 crisis has not deterred the property market in Victoria, which has been ... LEARN MORE

rankings
JUST RELEASED
April 25, 2022

REB Top 50 Agents QLD 2022

As the property market continues to roar in Brisbane and Queensland, the REB Top 50 A ... LEARN MORE

Coming up

rankings rankings
Do you have an industry update?

top suburbs

12 month growth
Mirador
103.33%
Bawley Point
98.13%
Walla Walla
90.7%
Byron Bay
86.67%
Kiama Heights
85.93%
Greta
84.14%
Nulkaba
81%
South Hobart
78.78%
Diddillibah
76.25%
Lennox Head
73.98%
SEE AREA REPORTS ON SMART PROPERTY INVESTMENT WEBSITE
Subscribe to Newsletter

Ensure you never miss an issue of the Real Estate Business Bulletin.
Enter your email to receive the latest real estate advice and tools to help you sell.