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.

5 factors set to sway the sub-$2m commercial market

By Kyle Robbins
04 August 2022 | 1 minute read
Vanessa Rader reb

Changes were afoot for the sub-$2 million asset class in the financial year 2022. Following on from these trends, a commercial research specialist shares five predictions that will impact the sector in the months ahead. 

In the 2021–22 financial year, this section of the commercial real estate market recorded 16,000 transactions with a total value of $12 billion. Vanessa Rader, Ray White Commercial’s head of research, outlined how these results represent a 2.3 per cent increase on the previous years.

In terms of where the most sales were made, that honour is bestowed on Victoria, whose 28.5 per cent of total transactions slightly betters the 27.6 per cent of NSW, with Queensland rounding out the top three (19.7 per cent).

A sign of its continuing growth in the sub-$2 million commercial sector, Western Australia claimed 11.5 per cent of national sales, followed by South Australia (8.5 per cent). Tasmania, the ACT, and the Northern Territory mustered 4.3 per cent.

She explained that the most popular asset class, having contributed to nearly half of all sales, was industrial, with that sector winning out even as others regained their strength. Unsurprisingly, given the permanency of working-from-home arrangements, as well as the presence of long COVID-19 lockdowns during the end of 2021 in NSW and Victoria, office volumes dropped while retail, medical and hotel/tourism assets climbed.

But as market conditions continue to change, here are Ms Rader’s five predictions for the months ahead:

  1. Industrial owner-occupier will continue to pursue assets:

Industrial sales accounted for 47 per cent of all transactions last financial year as owner-occupiers competed to secure assets to shelter them from rising rents. Historically low vacancy rates should see more owner-occupiers actively attempt to attain assets to ensure their businesses’ accommodation.

  1. Interest rate rises will see first-time buyers exit the market:

Last year saw a rise of first-timers entering the commercial real estate market, who sought higher returns on their assets, albeit with greater risk. With financing likely to become more difficult during the next year, it is expected these investors will move back to alternative investment opportunities.

  1. Tenanted investments will remain in favour:

There has been a growth in the uptake of “set and forget” assets as buyers look for long term, secure income streams. While there may be some amendments with yields, these assets will likely remain attractive to investors; however, more consideration should be placed on their location and quality of lease covenant as well as terms such as rent reviews. Assets in regional locations or with non-national, long-term tenants will see price corrections.

  1. Vacant assets to present opportunities:

Experienced investors will look to capitalise on changing market conditions. Vacant assets or ones that could be repositioned will be of interest to investors willing to get their hands dirty.

  1. Medical assets will remain attractive:

This asset class will continue growing in popularity they have garnered over the past few years, which won’t be exclusive to pathology and general practice assets but also extend to specialist services such as sports medicine, cosmetic surgery and natural health services. Additionally, aged care and childcare services will remain attractive, largely due to heavy government subsidies.

5 factors set to sway the sub-$2m commercial market
Vanessa Rader reb
lawyersweekly logo

Tags:

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
Box Hill
127.02%
Mollymook
82.85%
Brightwaters
79.93%
Cleve
78.13%
Bawley Point
76.2%
Murrays Beach
75.57%
Terranora
70%
Crescent Head
69.38%
Park Ridge South
68.32%
Mollymook Beach
67.09%
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.