| 1 Q4 2022 Insights
2 | Welcome 03 Why Raine & Horne Commercial? 04 At a Glance – Key Market Drivers 05 Australian Capital Territory 06 New South Wales 08 Queensland 23 South Australia 32 Tasmania 35 Victoria 37 Western Australia 40 International 42 National & International Map 44 Contents
Welcome | 3 Welcome to Raine & Horne Commercial Insights for Q4 2022. As we head towards the end of 2022, we face an interest rate environment markedly different from the beginning of the year. Yet, it is a testimony to the enduring strength of commercial property that Raine & Horne Commercial teams around Australia – and internationally, report ongoing high demand for commercial assets. The office market is benefitting from the re-opening of formal workplaces. This has also buoyed the retail property sector, supporting rising consumer traffic particularly in central business districts. The industrial propertymarket continues to experience a significant undersupply of assets in the face of robust demand. The time lag in constructing new industrial assets means we could see demand outweigh supply for some time, and this is supporting rising values, extremely low vacancy rates, and healthy yields. Despite the Reserve Bank of Australia embarking on a string of interest rate hikes since May, Raine &Horne Commercial experts report little impact to date on the commercial market. Many investors tend to be cash buyers and are therefore not impacted by interest rate movements. Where we are beginning to see a shift is in the attitudes around the ‘green’ characteristics of commercial properties. Buildings with eco-friendly features such as an abundance of natural light, energy sourced from renewables, lower carbon emissions from building operations, and minimal waste or water consumption, are increasingly attracting interest from both investors and lessees. This preference for eco-friendly properties allows building owners and tenants to meet their environmental, social and governance (ESG) commitments, while also providing scope for cost reductions. Demand for eco-friendly buildings is likely to become more of a driving force in the market as Australia works towards net zero emissions by 2050. I invite you to take a look through Commercial Insights Summer 2022, to discover how the commercial property market is faring in your area, around the nation and beyond. As always, Raine & Horne Commercial’s skilled team of property experts are available to discuss property opportunities in your preferred market. Welcome Angus Raine Executive Chairman Raine & Horne Group
4 | Welcome For almost 140 years, Raine & Horne has been assisting Australians to achieve their property objectives. Since our launch in 1984, Raine & Horne Commercial has been an active market participant and is now one of the largest commercial property groups in Australia, with over 25 offices servicing every state capital, key regional growth centres and the Asia-Pacific region. We are a full-service commercial real estate network with a broad suite of commercial, industrial and retail property services including sales, leasing, consulting, business broking, business recovery and insolvency, facilities and asset management services. Why Raine &Horne Commercial?
Welcome | 5 At a Glance - The KeyMarket Drivers Investors seeking solid assets in an uncertain world Sharemarket volatility, the fall of speculative investments such as cryptocurrencies, and rising inflation are driving investors to tangible assets off ering att ractive returns. Commercial property fits this bill, with the potential to deliver healthy net yields and long term value growth. A return to ‘normal’ The impact of COVID-19 is dialing down. Consumers are returning in droves to bricks and mortar shopping centres, workers are heading back to formal workplaces, and travel both domestically and globally, is on the road to normal. Increasing arrivals to Australia – both immigrants and tourists, will lend further support to sectors such as retail and tourism which will rebound, and this will underpin demand for commercial property. Tight supply For several years now, the boom in residential property values has seen commercial properties make way for residential developments. Coupledwith limited development of new industrial estates, many Raine &Horne Commercial experts are reporting a signifi cant undersupply of commercialproperties, especially industrialproperties.Anongoingshortageofnewcommercial developments suggests the current supply/demand imbalance could continue for some time.
6 | Welcome Australian Capital Territory Commercial Markets Overview
Australian Capital Territory | 7 Mark Nicholls of Commercial Canberra says yields in the nation’s capital range from 5.5-6% for retail and industrial space, rising as high as 7% for office properties. Key drivers across the ACT commercial market include healthy returns and the short supply of quality stock on the market. As an added sweetener, Mark notes that the stamp duty-free threshold for commercial property has recently increased again from $1.6 million to $1.7 million. Another factor driving the office leasing market is that some government tenants require a specific NABERS rating that measures the environmental performance of Australian buildings and tenancies. At the same time, higher interest rates have delayed the conversion of some deals. Commercial Canberra Mark Nicholls mark.nicholls@canberra.rhc.com.au
8 | New South Wales New South Wales Commercial Markets Overview
New South Wales | 9 According to Mark Ammoun of Commercial Bankstown, industrial yields in the area are around 4%, rising to 6% for retail and office space. Vacancy rates range from 6-7% for retail and office space, but are as low as 1% in the industrial market. Retail yields are expected to rise. Mark says, “With borrowing capacity diminishing as a result of higher interest rates, this asset class is likely to retreat, in line with such rate rises.” Office yields may also increase, reflecting an oversupply in the area. “Industrial assets on medium to long term leases will slightly decrease in value, as investors will be chasing higher yield in-line with recent rate rises,” notes Mark. “I believe vacant assets or sites sold with short term leases (in the industrial sector) will remain strong due to owner occupiers, with prices holding firm.” Mark says themarket is still being driven by “a cohort of buyers looking to diversify their property portfolios by acquiring commercial assets. This is primarily driven by the higher yields on commercial properties at present.” He adds that investor activity has decreased over the past six months, in many cases because rate rises have impacted borrowing capacity. Mark notes, “Owner occupiers are still aggressively seeking quality industrial assets, and we are seeing very low industrial stock levels come onto the market.” Mark Ammoun m.ammoun@rhc.com.au Bankstown
10 | New South Wales Brad Rogers of Commercial Central Coast says yields on commercial assets in the region start at about 6% for A-grade industrial property, rising to 6-7% for retail space, while yields on office property are starting to wind out to around 7%. Brad expects little change on retail yields, saying the market seems to be “relatively balanced at the moment”. Industrial yields are also expected to remain unchanged as there is some good supply coming onto the market and this may eliminate the tight supply currently being experienced. In the offi ce market yields could rise, with Brad noting, “We are just starting to feel a little bit of sluggish behaviour in the leasing market for commercial buildings”. In terms of vacancy rates, the retail market is still reasonably tight, with vacancies between 6-8% in leading suburbs. The popular industrial market has a vacancy rate below 5%, and in the office market, Brad says he is “Just starting to see close to 10% vacancy rates and days on the market are getting longer”. According to Brad, COVID-19 supply chain issues are resulting in logistics struggles. The need for local businesses to carry more stock on hand has put pressure on existing property holdings, and as a result, industrial rent has increased. Still looking at COVID-19 impacts on the Central Coast commercial property market, Brad explains that “Some tenants request a clause regarding COVID-19, and are disappointed when we advise that the lease will have a clause suggesting that the lessee takes the property with full knowledge of COVID-19 and past implications”. Brad Rogers brad@cc.rhc.com.au Central Coast
New South Wales | 11 Luke Smith of Commercial Inner West/South Sydney says yields in the area range from 3-4.5% for retail and office space, and from 3.5-4% for industrial property. Vacancy rates are in the order of 5% for retail and office property, falling to as low as 2% across the industrial market. According to Luke, the main drivers of the market at present are an equal combination of investors looking for high yields in high growth areas, and owner occupiers looking to amalgamate existing portfolios frommore expensive South Sydney regions in search of more functional and central positions. The lifting of restrictions and decreased prevalence of COVID-19, has increased the confidence of buyers seeking opportunities for value in high growth areas. Luke explains, “We have received a significant number of enquiries from business owners who are expanding, relocating and amalgamating existing portfolios.” In response, the team at Commercial Inner West/South Sydney have expanded their database of active tenants, owner occupiers and investors seeking quality industrial space across the Sydney metro region. Luke Smith lsmith@rhcss.com.au Inner West | South Sydney
12 | New South Wales Bruce Schell of Commercial Liverpool says the area is experiencing strong interest for all types of industrial assets whether freestanding warehouses or strata units and vacant land, backed by ongoing demand for investment properties. Bruce expects demand for both leasing and sales to continue through the foreseeable future. Yields for industrial sales are softening slightly at around 5-6% as a result of rising interest rates coupled with the impact that rising inflation is having on buyer confidence. Sales and leasing for the office sector is patchy, with steady demand for smaller offices (less than 150 square metres) to buy or lease. Apart from Liverpool Council’s Civic Plaza development, there are two other mixed use (office, residential and hotel) towers under construction in the area, or which have DA approval, due for completion in 2025. The retail sector in Liverpool has enjoyed relatively steady leasing activity over the past 12 months. While the restrictions imposed during the COVID-19 pandemic and the continuing effect of rising interest rates have dampened sales activity, Bruce says there is an underlying demand from buyers for small retail premises, either in a strata or freehold configuration, with the potential for growth when the market experiences an upturn over the next two to three years. Bruce Schell bruce.schell@rhc.com.au Liverpool
New South Wales | 13 Daniel Krobot of Commercial Macarthur reports that yields in the region are about 5% for retail and office space, dipping to 4% across the industrial market. The industrial property market continues to boom across the Macarthur area, with Daniel saying there is still a limited amount of stock for sale and lease. Vacancy rates are virtually 0% though a more cautious approach is being seen now, especially in the under $5 million price range, due to the rising cost of living. Vacancy rates are higher for other types of property – around 5% for office space, and 10% for retail property. The value of property, infrastructure improvements and location are the main drivers for buyers at present, though COVID-19-related supply chain disruptions are helping to drive the industrial market. Daniel says, “There is virtually no available stock in the industrial market – from a 100 square metre unit to a 10,000 square metre warehouse.” He adds, “Businesses are now needing to plan 24 months-plus in advance for a move to a new premises.” Daniel Krobot daniel.krobot@rhc.com.au Macarthur
14 | New South Wales Brad Wallace, Managing Director of Commercial Newcastle, says yields on retail property across the city are around 4-7%, rising to 5-7% for both industrial and office assets. These yields are all expected to hold stable into the New Year. Interestingly, Brad adds that both buyers and lessees in the Newcastle area are beginning to factor the eco-credentials of a property into their decision-making. Also, while businesses are still looking to expand, the cost of funding following successive interest rate hikes has forced some owners to rethink their strategies. “Interest rates have impacted access to funding and borrowing capacity. As such, we expect more local businesses to consider leasing a commercial property for the next few years as an alternative to buying until the current round of interest rate hikes stabilises.” Warren Plumb warren.plumb@newcastle.rhc.com.au Newcastle
New South Wales | 15 Nick Moloney says “vacancy rates in Sydney’s North start at about 4-5% for industrial space, rising to 4.5-5.5% for office property, and 5-6% for retail assets. Retail yields are expected to fall, with Nick saying, “Post-COVID-19 has seen a greater number of retail businesses return to retail property along with an increase to staff returning to offices as businesses begin to enforce a minimum number of work days in the office. “This increase in pedestrian traffic gives retail operators more confidence in revenue and greater consistency, which flows into demand for retail properties from operators and investors.” Industrial and office yields are expected to remain stable. In terms of office space, Nick explains, “Lack of stock continues to underpin office values in our market, however it is important to note the negative impact on confi dence of recent interest rate rises.” Lack of quality stock, demand from owner occupiers, and an increased buyer pool of investors looking for safe investments is driving the North Sydney market. Nick notes, “With the worst impact of COVID-19 behind us, we’re seeing greater business confidence and profit growth, which gives confidence to investors looking to buy property.” Jay Sheffield says that ESG factors are being considered, saying, “Medium and large lessee’s continue to consider ESG implications when selecting a new office. Many are utilising the current high vacancy rate and incentives on offer to take a step up in the quality of their office when their lease expiry approaches. This ‘flight to quality’ as many are calling it, is reaching and exceeding many of the lessees’ ESG targets. Smaller lessees however, are more focused on flexibility and what the property offers their business, staff and clientele.” Nick Moloney nick@rhcns.com.au North Sydney
16 | New South Wales Duarte Figueira of Commercial Parramatta says little has changed in Parramatta’s buoyant commercial property market over the last six months of 2022. Yields in the area are around 4.5-5% for office space. Industrial property is delivering yields of 4.5%, and retail space is generating yields averaging 5%. Duarte expects these yields to remain stable through the first half of 2023 if the low levels of investment stock on the market continue to prevail. Demand for industrial space in particular, is being driven by demand fromowner-occupiers –mainly distribution-related businesses as well as those in food packaging, consumer goods, flatpack furniture and fashion accessories. Duarte says, “Cashed up buyers are leading the charge for Parramatta industrial property, so rising interest rates aren’t a factor as yet.” He notes, “We are also continuing to see international (and local) demand from registered training organisations/colleges (RTOs) that are choosing Parramatta CBD as an ideal location. This, in turn, is helping to lessen the impact on the current vacancy rate in the CBD office market that is struggling to deal with the legacy of COVID-19 and the “Work From Home” movement.” “The work-from-home trend is impacting demand for office space take up.” Duarte Figueira dfigueira@rhc.com.au Parramatta
New South Wales | 17 Colin Henry of Commercial Penrith says industrial space in Penrith is generating yields of 3-4%, a figure that climbs to 5-6% for retail assets and 6-7% for office properties. According to Colin, a string of rate hikes makes it hard to predict how yields on retail assets will move. That said, he notes, “Demand for industrial property has been at an all-time high with no signs of slowing down”, and yields on these assets are expected to remain stable. Office yields are also expected to remain unchanged as “commercial office space in Penrith has not experienced much movement in yields or rental rates in the last year.” Penrith’s tight commercial market is reflected in low vacancy rates, which are just 2% for industrial property and 5% for retail assets, rising to 10% for office space. Colin is seeing some impact from higher interest rates, saying, “Borrowing capacity has changed and some buyers are therefore not able to commit to their original offer.” Colin Henry colin.henry@rhc.com.au Penrith
18 | New South Wales Graeme Garrett of Commercial Port Macquarie says net yields in the region are around 5-6% for both retail and industrial properties, rising to 5.5-6.5% for office space. Low supplies of stock are expected to see yields remain stable. In a very tight market, Graeme says rental vacancy rates are just 2% in the industrial sector, rising to 3% for retail properties and 4% in the office market. This reflects Port Macquarie’s nature as a regional growth area located approximately four hours north of Sydney, with good local infrastructure in place. In terms of the impact of rising interest rates, Graeme says, “Our regional market has not seen any softening of prices, rentals or yields at this stage.” Graeme Garrett ggarrett@rhcpmq.com.au Port Macquarie
New South Wales | 19 Anthony Bouteris of Commercial Sutherland Shire says yields in the Shire are around 4-5% for industrial property, and closer to 5% for retail and office space. Anthony expects retail yields to fall, saying “Retail Investors are now looking for a minimum 5% net return”, though office and industrial yields are expected to hold firm as the cost of debt rises. Across the region, vacancy rates are in the order of 5% for office and industrial space, rising to 10% for retail property. Anthony observes that “Owner occupiers still driving demand for industrial property and office space”. He adds, “The majority of our industrial enquiries for sale and lease are companies looking for more space to expand into for storage and distribution.” However, rising interest rates are having an impact. “We are now finding that finance is a big factor in getting deals over the line,” says Anthony. “Banks are tightening on lending, and the majority of owner occupiers are purchasing through self-managed super funds. The majority of big banks tend not to lend to this scenario, so buyers are resorting to second tier lenders, which tend to have higher rates.” As rates rise, Anthony says, “We are starting to get called into more properties, with owners now starting to feel the bite of increased interest rates”. This could see an increase in the volume of commercial properties – across all sectors, come on to the market over the next couple of months. Anthony Bouteris anthony@rhmiranda.com.au Sutherland Shire
20 | New South Wales Commercial Tamworth leader Bob Newlan, says yields in this part of New England range from 6% for retail properties, through to 7% for industrial stock, and as high as 9% for office assets. Vacancy rates in Tamworth are as low as 2% for industrial space, 3% on retail property, and up to about 20% for office properties. Bob says the wider commercial market is seeing some signs of skepticism though this hasn’t appeared in the local Tamworth market. That said, he notes, “There has been a reduction in freehold opportunities in recent times but no doubt, financing is now a concern”. He adds, “The market remains rural based, so to some extent weather conditions are more likely to impact Tamworth compared to other issues”. Bob Newlan bob.newlan@tamworth.rhc.com.au Tamworth
New South Wales | 21 According to Craig Tait of Commercial Wagga Wagga, yields in the area range from 6-7% for retail property through to 6.5-7.5% for industrial and office space. Craig believes retail and office yields are likely to rise by 0.5% over the next 12 months due to rising interest rates, which are putting pressure on investment returns and capital values. Yields on industrial assets however, are expected to stay the same owing to high demand from owner occupiers, even though investors are seeking a better return on investment. The main market drivers of Wagga Wagga commercial markets are strong investment returns and demand from owner-occupier businesses currently experiencing growth. Also, warehousing use has increased for many larger companies, and some owner-occupiers are even leasing additional space to support their warehousing requirements. Craig adds that government tenants and NDIS operators are seeking compliant buildings that tick all the boxes concerning environmental, social, and corporate governance criteria. This has increased demand for modern, high-quality tenancies catering for ESG requirements. Craig Tait craig.tait@wagga.rh.com.au Wagga Wagga
22 | New South Wales Mathew Ivanoff of Commercial Wollongong says yields on commercial property in the region are up a touch since the middle of 2022 and now range from 6.0% for office space to 6.5% for industrial assets and 8% for retail property. “Yields are up because higher interest rates have impacted businesses in our trade area.” According to Mathew, the industrial market remains the pick because small to medium sized businesses in the Wollongong region are ramping up. “Now that COVID-19 is behind us, demand for industrial property has gone to the next level as companies expand and need more space. “The challenge is that industrial property is tightly held, so expanding businesses are leasing rather than buying. So our industrial leasing market is quite strong.” In contrast, demand for retail is a litt le flatter, except for restaurant space, while office market demand is driven mainly by government and semi-government agencies such as providers involved in the National Disability Insurance Scheme (NDIS). Mathew Ivanoff mathew@rhw.com.au Wollongong
Queensland | 23 Queensland Commercial Markets Overview
24 | Queensland Trent Bruce of Commercial Brisbane North says the retail markets are generating yields on average of around 4.5-5.5%, offices 6-6.5%, and 5-6% for industrial assets. Achievable yields must also take into consideration the quality of building and tenant, and WALE remaining on lease terms in addition to the actual price point. Trent notes, “We are experiencing the tightest yields at the more aff ordable end of the market, that is, the sub-$3 million range.” These yields are expected to stay the same into early 2023. In regard to the retail market, Trent explains, “Interstate migration and a continuation of strong spending patterns by consumers suggest that litt le will change in the short term. However, if interest rates continue to rise into 2023 we expect the market will return to a more normal supply/demand situation.” In the industrial sector Trent says the market is showing “little sign of slowing, with extremely low vacancy rates, growth in online shopping and the continuation of interstate migration.” The office market is expected to remain stable owing to the influx of businesses migrating from southern states to South-East Queensland. Reflecting the buoyancy of the market, Trent says vacancy rates are as low as 1% in the industrial sector. He explains, “Industrial vacancies are currently below 1%, which has been caused in part by companies holding higher levels of inventory combined with an increase in storage requirements for online shopping businesses.” The vacancy rate for retail assets is 5%, climbing to 7% in the office market. Trent sums up the market, saying, “Despite recent increases in interest rates, interstate buyers are still attracted to the Brisbane market due to higher yields than Sydney and Melbourne. Historically, interest rates remain low, and there is still strong demand from owner occupiers and local investors to secure quality assets.” Trent Bruce tbruce@rhcommercial.com Brisbane North
Queensland | 25 Joseph Grasso of Commercial Brisbane Southside says industrial and retail properties are generating yields of 5.5-6%, rising to 5.75-6.25% for office space. Joseph notes, “Due to recent interest rate rises we see retail and office yields softening over the next six months.” However, industrial yields are expected to remain stable. Joseph notes, “The low supply and high demand should see industrial prices buck the trend of softening yields.” “Beyond this period, if interest rates were to continue to rise and demand reduced significantly there comes a point in time when yields will mirror interest rate rises and increase accordingly. At the same time, we are seeing real rental growth occurring following a sustained period of lower vacancy and CPI increasing rents between 6-8%.” Vacancy rates continue to be low across Brisbane South. In the industrial market, vacancy rates are just 3%, rising to 6% and 8% for retail and office properties respectively. Current drivers across the local market include low supply, high consumer demand and low unemployment. Joseph adds that while this landscape could change in the latt er half of next year, rising interest rates right now are having very little impact to date on the Brisbane South commercial market. Joseph Grasso joseph@rnhcommercial.com.au Brisbane Southside
26 | Queensland According to Michael Parisi of Commercial Gold Coast, yields on the Coast are currently 5-6% for retail assets, climbing to 6-7% on industrial property, and as high as 10% plus for office space. Vacancy rates are as low as 5% across the industrial market, rising to 10% for office properties. Retail vacancies vary, with Michael saying, “Those areas that rely on tourism will continue to have higher vacancy rates compared to suburban centres that are well supported.” Michael says the market on the Gold Coast is being driven by stability, redevelopment opportunities and good WALE in leases. He adds that rising interest rates are making finance more difficult, with banks lifting their risk repayment terms. In addition, the increase on land tax for foreign owned assets is driving restructuring where possible – and disposal, where it’s not. Michael Parisi michael.parisi@rhc.com.au Gold Coast
Queensland | 27 In Hervey Bay, one of the primary growth centres servicing Queensland’s Fraser Coast, commercial property sales and leasing enquiry are strong across the board. According to Tim Wessling of Commercial Hervey Bay, investors seeking decent yield are driving the retail, industrial and office sales markets. “These savvy investors want commercial properties that have quality tenants on long-term leases.” Meanwhile, on the leasing side, expanding small businesses and start-ups are taking their first steps into a professional commercial space with a lease. “Many start-ups or sole operators in Hervey Bay seek a commercial space as they have outgrown a spare bedroom or granny flat. Many will have plans to expand their teams, and working from home won’t cut the mustard. ” Hervey Bay Tim Wessling tim.wessling@herveybay.rh.com.au
28 | Queensland Des Besanko of Commercial Mackay is seeing high yields in the region, in the order of 6.5-7% for retail space, 7.25-8% for industrial assets, and 8.5-9.5% for office properties. These yields are expected to hold firm, with Des noting, “There are still investors looking for quality assets, however rising interest rates have stopped the reducing nature of expected yields.” According to Des, “The local economy is running quite strongly, with record high prices for thermal and coking coal worldwide. With high output, the maintenance of mining equipment drives the local economy. The main restriction being the lack of staff options.” Des adds, “Investors in the sub-$5 million range have generally been cash buyers, and are less affected by interest rate rises. Syndicates and property trusts that lend to a certain loan to value ratio have increased their requirement or halted their buying for the moment.” Des Besanko des.b@rhc.com.au Mackay
Queensland | 29 According to David Smith of Commercial Sunshine Coast, yields on the coast are sitt ing at about 6% across the commercial market though they can fall to 5% for some offi ce properties depending on the quality of the tenant. David adds that when it comes to rising interest rates, the Sunshine Coast seems to be somewhat insulated compared to other areas. He notes the area is experiencing “Huge migration from southern states, particularly Victoria”, and adds, “We haven’t yet seen how and what impact interest rate rises will have on commercial owners.” Further supporting demand, especially for industrial assets, David says, “There is no land available at this stage for new industrial developments.” This is driving values higher on the Sunshine Coast. As a guide, the most recent sale of an industrial block of land in the Chevallum Industrial Park (group title estate) commanded $750 per square metre – a block that David sold just 2.5 years ago, for $300 per square metre. In the offi ce market, David says Walker Corporation will be developing extensively in the Maroochydore CBD, and he believes the resulting towers “will bring a new dimension to office quality in the region”. David Smith davidcsmith@csc.rhc.com.au Sunshine Coast
30 | Queensland Andrew Lynch of Commercial Toowoomba says industrial property is proving very popular in the region, with more buyers than sellers in the market. He notes, “We are selling quite a bit of property off -market, and have also seen an increase in sales for vacant industrial land.” Investors are starting to seek higher yielding assets as interest rates rise. However, Commercial Toowoomba’s Nick Koenig says, “Over 90% of our buyers are cash buyers. Others are well-established, so finance is not a problem. We have not had a contract fall over due to finance for over 12 months.” He adds, “Both the sales and leasing markets have been quite strong for the last 18 months to two years, which has seen a tightening in the amount of available property to list. We are also seeing a rise in off-market transactions as we have buyers ready to go when we obtain stock to sell or lease.” Andrew Lynch andrew.lynch@toowoomba.rh.com.au Toowoomba
Queensland | 31 The commercial property market in Townsville has remained strong throughout 2022. It is expected to continue its positive run into 2023 because of the combination of strong business confidence and employment growth that are up year-on-year. According to Peter McCann of Commercial Townsville, small properties under $1 million are popular, with owner-occupier buyers choosing to buy and take advantage of low-interest rates available in themarket. This activity has caused a shortage of small tomedium industrial warehousing opportunities for lease, and prices per square metre have shifted to anywhere between $130 and $180 sqm. Solid sales and leasinggrowth in 2022 for industrial properties have seenan increase in commercial land sales. Some industrial properties have sat dormant for years, and developers are reaping the benefits by building small industrial estates to meet demand. “The suburb of Garbutt remains the place to be for small to medium businesses who still want to be close to the suburbs and the CBD,” Peter says. Out-of-town investors continue to look further north of Brisbane to regional areas where they can buy a lot more for their dollar and receive better yields of anywhere between 7 and 9%. These yields are across all sectors, office, retail and industrial. Where strong leases are in place, investors are purchasing sight unseen in some cases to avoid missing out. Demand for office space in the CBD is middling, with businesses choosing the suburbs to set up rather than the CBD. However, there is evidence of renewed confidence in the CBD, with several investors buying older-style properties with views. Peter explains, “The investors are reinvigorating these properties with a new look and re-leasing them to retail and office-based businesses. “On the whole, Townville will benefit from strong economic development from infrastructure projects in the pipeline or already underway. This economic strength will enable the capital of North Queensland to remain the choice for commercial property owners for the foreseeable future.” Peter McCann peter.mccann@townsville.rhc.com.au Townsville
32 | Queensland South Australia Commercial Markets Overview
South Australia | 33 Simon Winter, Principal of Business Sales, believes the market hasn’t fully recovered from the pandemic and is still a bit nervous, with the current round of interest rates impacting this recovery. “There’s much talk about interest rates. But only a third of the population is impacted by mortgage interest rates, while everyone feels the pain of higher electricity prices.” That said, there are still plenty of sales, with those businesses hitting the market in far better shape than the fire sales forced on owners during the pandemic. Simon explains, “During the pandemic, business owners overseeing struggling businesses saw a sale as the only way they could sail off into the sunset. But this wasn’t realistic. “Now there are businesses that have recovered well from COVID-19, and by selling them now, their owners will be able to sail off into the sunset genuinely.” At Business Sales SA, Simon and his team sell any business, whether it’s worth $350,000 or $10 million or more. “In Adelaide, we primarily operated at the bottom of the scale, but now we’re selling more businesses worth $1 million and above.” “We have one business in the mining sector for sale worth more than $10 million. We are also starting to sell more businesses run under management rather than owner-operated small businesses.” Simon Winter simon.winter@bsa.rh.com.au Business Sales
34 | South Australia David Ente of Commercial South Australia says yields in the commercial market range from 4-5% for industrial assets, to 5-6% for retail property and 5-7% for office space. He believes these yields have the potential to rise by 1-1.5% into early 2023. According to David, investment activity in the market is still strong, with owner occupiers being “very active” particularly in the industrial sector. Some buyers are beginning to add ESG criteria to their property wish list, though this is not a factor being seen among lessees at present. Rising interest rates are not hampering buyer activity at present, and it’s a similar story with any lingering impact of COVID-19. However, David says, “We are putting in clauses in leases regarding complying with directions in case of pandemics.” David Ente david.ente@rhc.com.au Commercial SA
Tasmania | 35 Tasmania Commercial Markets Overview
36 | Tasmania According to Leslie Simpson of Commercial Hobart, yields on retail assets are around 4.5-5.5%, rising to 4.75-5.25% for industrial space and 5.25-6.25% for offi ce properties. Strong demand and limited supply is likely to see these yields remain stable. Hobart is experiencing low vacancy rates across the commercial market. Both office and industrial property are seeing near-zero vacancy rates of 1-2%, while the vacancy rate across the retail market is 5-6%. Leslie says continued strength in the local economy, competitive interest rates (albeit higher than previously) and strong demand for industrial assets are all key drivers of Hobart’s commercial property market. Such is the strength of the local market that Leslie says higher interest rates are having little impact dampening the enthusiasm of investors or owner occupiers. Leslie Simpson leslie.simpson@rhc.com.au Hobart
Victoria | 37 Victoria Commercial Markets Overview
38 | Victoria Tim Frlan of Commercial Brunswick reports yields of 4-5% for both retail and industrial property in Brunswick, rising to 5-6% in the office market. These yields are forecast to remain unchanged into early 2023. The Brunswick area is experiencing tight vacancy rates. In the industrial property market, vacancy rates are just 1%, rising to 5% for retail space and 10% for office property. Tim Frlan tim.frlan@brunswick.rh.com.au Brunswick
Victoria | 39 Randolph Clements, MD of Victoria says quality retail and industrial properties up to $10 million are “going off like crackers” when they hit the market. At the same time, the work-from-home trend is impacting demand for office space. “There are quality retail properties on the western side of the CBD that are hitt ing the market with price expectations of $5-5.5 million. One of these properties sold for approximately $7.2 million in early November to the surprise of the agents,” Randolph said. According to Randolph these strong sales results are being recorded against a backdrop of interest rate rises, and the reasons are simple. “If investors or developers get a decent income from a commercial property, they’ll make the purchase. They will then landbank the property until building costs return to normal. If you start building right now, the cost of labour and materials are just too high.” Randolph said strong prices are not confined to Melbourne. Blue-chip retail sites with plenty of upside in holiday meccas such as Sorrento on the Mornington Peninsula are selling for many millions more than the vendors’ price expectations. While more industrial property is available in Victoria, quality assets are selling well. On the flip side, more people working from home is affecting office space in the Melbourne CBD. Commercial Victoria
40 | Victoria Western Australia Commercial Markets Overview
Western Australia | 41 The industrial market in Perth has enjoyed an excellent 2022 with significant pre-sales to market of a large number of industrial lots within The Tonkin West Industrial Estate, Forrestdale – The Rockingham Industrial Estate, Rockingham and the final industrial sales of the 40+Ha Precinct 95, Forrestdale, a highlight noted by Anthony Vulinovich of Commercial WA. Commercial WA has had a stellar sales year across the division and brokered the sale of Perenti’s Canning Vale asset for $32 million and Hillary’s Shopping Centre for $37 million. In addition, the team amassed over 110 separate sales transactions of different sizes. “The industrial appetite has been overwhelming over the last year, with industrial stock levels now at an all-time low across both the sales and leasing markets,” said Anthony. Anthony Vulinovich anthony.vulinovich@rhc.com.au Commercial WA
42 | Western Australia International Commercial Markets Overview
Western Australia | 43 Muhammad Zhahril Dato’ Zaki of Commercial Malaysia says, generally, yields on retail property are hovering around 6-8%, while industrial segments noticed slight dipping in between 5-7%, and 5-6% for office markets. Retail yields are expected to improve over time, with retail malls located within tourist hotspots possessing better demand and footfall, backed by the economic recovery and international border reopening, which helps to boost the momentum of the retail sector. Industrial yields were seen on the right track and anticipated to continue to progress positively. This was reflected by higher demand for warehouses and the logistics sub-sector in line with the growing number of e-commerce activities during the pandemic. The sector is also being strongly supported by increasing industrial investment activities by overseas companies, and thus resulting in the expansion of numbers of industrial parks flowing due to an uptick in demand. Zhahril says the main drivers of the commercial market at present include rising values and recovering market activity. He notes that inflation and rising interest rates may pressure property transactions volume, but not necessarily for investors with better cash flows in hand. Muhammad Zhahril Dato’ Zaki zhahril.zaki@malaysia.rh.com.au Malaysia
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