Trend driven by businesses’ gradual return to pre-pandemic conditions
Demand for prime grade office space has significantly increased in Sydney, real estate agency Raine & Horne Commercial revealed.
Its latest Commercial Insights Report, which offers an overview of the commercial property market across its national network in Australia, showed that demand for office and retail space is rising as workplaces return to normal.
Wollongong, located south of Sydney, is also experiencing growth in the office market, due to increased demand from allied health businesses.
Angus Raine (pictured), executive chairman of Raine & Horne, attributed the trend to businesses moving towards pre-pandemic operational levels.
The report also underscored the enduring demand for industrial properties across the country, despite the limited supply. This trend is evident in Brisbane, where industrial rents are rising due to the city’s economic growth and business expansion, leading investors to seek high-quality A-grade assets.
Meanwhile, a potential shortage of new industrial developments is expected to push values up, especially in Sydney’s key industrial areas like Liverpool, Campbelltown, Sutherland Shire, and Macarthur.
“The noticeable scarcity of new industrial properties is contributing to low vacancy rates in key locations,” Raine said.
The report also discussed the impact of the Western Sydney International Airport development on local markets, transforming rural properties in Liverpool for industrial, commercial, mixed-use, or residential purposes. In southwest Sydney, significant demand for freestanding industrial assets has created a supply imbalance, notably in Bankstown.
Despite the positive trends, the report noted a decline in investor engagement due to increased interest rates, affecting the value of assets with medium to long-term leases.
“The Australian commercial real estate market in 2024 is on the brink of significant transformation, which will present new opportunities for savvy owners and purchasers,” said Chris Nicholl, commercial network head at Raine & Horne Commercial.
“Influenced by multifaceted elements such as supply chain and construction costs, the cost of borrowing, evolving investment strategies, and changing consumer habits, the commercial sector is witnessing nuanced shifts across various market sectors.
“The prevailing cost of money is driving a trend towards softer yields across investment properties, which is likely to trigger a reassessment among investors, potentially prompting the entry of properties into the market.
“Despite these transitions, cautious optimism permeates the commercial sector. Rental sectors, like logistics or retail properties with CPI-linked rental growth, are expected to remain relatively stable and profitable soon.”
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