In a world of record low interest rates and global stock markets facing uncertainty, Australia’s commercial property sector looks set for another bumper year. Demand for property is unlikely to be adversely affected by any slowing in global growth, as international private equity firms and domestic super funds look towards the market as a good source of returns.
With its expected upward trajectory over the next 12 months in mind, we’re examining some of the key commercial property trends.
1. Strong sales
According to data firm M3Property, a short supply of land has pushed industrial land values in Sydney up by 36.2 per cent over the year to June 2019. In Brisbane, they have soared 21 per cent in the same time period. Some experts believe this will stimulate the market further with owners of industrial land potentially seeking to capitalise on this growth by selling property assets and reinvesting funds into their businesses.
2. Everything old is new again
One of the key areas of movement in commercial property is in old industrial sites, which are being sold to unlock large parcels of commercially zoned land. Sites offering vacant possession or short-term lease back arrangements are attracting a premium.
Property market participants are particularly interested in the manufacturing sector, where companies are continuing to offshore production or invest in automation. As a consequence, many owner-occupiers of these land parcels are using the increase in value to reinvest in new technology and upgrading their operations and logistics for the 21st century.
3. Demand for online hubs
The ever-increasing demand for online shopping means that investors are looking for industrial land in inner city locations to be used as ‘last mile’ logistics hubs.
Urban logistics continue to grow as e-retailers seek warehouse space in areas around city fringes to remain competitive in terms of delivery times and costs. It’s forecasted that this trend will mean that demand shifts inwards, rather than to outer city suburbs. The inner city is also where online businesses are expected to pay a premium for land, both in purchase and rental price.
4. Repurposing of land
As a result of the booming prices, corporate investment groups are looking for value in the market. In particular, many are looking to find land with the potential for rezoning and redevelopment.
This is heating up the market in particular in western Sydney, where short supply and an appetite for land around the proposed second airport site in Badgerys Creek have continued to push up prices.
5. Flexible spaces
The changing nature of the workplace means that flexible office spaces have a strong growth trajectory for the coming year.
Australian businesses are expecting to decrease the amount of office space they have traditionally leased in the medium term, as firms look to capitalise on the trend of flexible working arrangements and co-sharing internally. This downturn is expected to be offset by growth in the number of office centres specifically catering to this demand.
6. Cashing in on tourism
A weakening Australian dollar will benefit the hotel industry, as we become a more attractive destination for visitors from abroad. According to Tourism Research Australia, in the past decade, any year where the Australian dollar has depreciated against the US dollar by 10 per cent or more, hotel nights occupied by international visitors grew an average of 5 per cent.
The currency change also means that Australians are more likely to holiday at home, which will similarly boost the sector.
Are you considering maximising on the potential returns from commercial property? Check out our strategy for identifying the right property or learn how commercial property investment could be more accessible with the help of a property trust. The information on this website contains general information and does not take into account your personal objectives, financial situation or needs. We recommend you consult a licensed financial adviser. Trilogy is only licensed to provide general financial product advice on its own products and does not consider your objectives, financial situation or needs when providing any information or advice.
