The best-performing asset classes for a rebounding economy have been revealed in Raine & Horne’s latest Commercial Insights report.
As workers flock back to professional office settings and retailers migrate towards brick-and-mortar shops once more, the network’s report has found that demand for commercial property has soared as the COVID pandemic grows further and further in the nation’s rear-vision mirror.
Reflecting on the report’s findings, the executive chairman of Raine & Horne, Angus Raine, said the strength of the sector looks likely to continue into the near future, especially with few new industrial developments already in the national pipeline.
“We are seeing unprecedented demand drive near-zero vacancy rates for industrial assets in many areas. This is encouraging small business to invest in their own premises, adding further demand to an already buoyant market,” Mr Raine said.
“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.”
The reports found that there is an unprecedented demand for industry property as small businesses opt to invest in their own premises and as such, the ongoing shortage of new commercial developments suggests the current supply/demand imbalance in the commercial market could continue for some time.
A key aspect of this rebound has been the post-pandemic resurgence of the national office market as many teams make a return to formal workplaces, with this trend expected to incite growth in central business district retail markets.
The Tasmanian capital, Hobart, is reporting vacancy rates across the office sector as low as 2.7 per cent, while Queensland’s Sunshine Coast is seeing record-low levels of office supply.
Speaking on this trend, Mr Raine said that after two pandemic-affected years, “we can expect to see rising demands as companies that initially downscaled their office footprint seek greater space to accommodate growing workplace teams”.
He also touched on not just the return to in-person shopping currently being experienced nationally but also on the repurposing of former retail space into other business offerings.
“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,” he said.
“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.
“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.”
Mr Raine shared his prediction that, as we enter a new environment of rising interest rates and inflation, he expects commercial property to become an even more sought-after asset.
“In recent years we have seen reports of investors losing money to cryptocurrencies, or experiencing the volatility of uncertain share markets. Not surprisingly, commercial property continues to be an attractive investment offering an appealing combination of healthy yields, long leases and attractive cash flows,” he concluded.
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