Tight supply drives commercial market – report | Mortgage Professional Australia

New data shows recovering demand for commercial property

By Steven Byerley

01 Aug 2023

Real estate group Raine & Horne Commercial has released its H2 2023 Commercial Insights Report, providing an in-depth analysis of the commercial property market across the company's national network.

As businesses gradually return to pre-pandemic operations, the report shows a recovering demand for retail and office spaces. Particularly, A-grade properties and eco-friendly spaces are witnessing increased interest, while older B-grade stock takes longer to find tenants.

Government policies are also influencing the market dynamics, the report said. In the Australian Capital Territory (ACT), the recent increase in the commercial conveyance duty tax-free threshold from $1.7 million to $1.8 million, effective from July 1, has implications for the commercial property landscape. Additionally, South Australia's participation in the AUKUS submarine build is boosting positive market sentiment and driving the commercial market forward.

The demand for commercial property remains strongly influenced by infrastructure projects. The construction of Western Sydney Airport (also known as Nancy Bird Walton International Airport) is a significant driver in Sydney's Western suburbs, fueling demand for commercial properties beyond the airport precinct to areas like Penrith, Liverpool, and the Macarthur region centred around Campbelltown. Similarly, Perth's commercial property market is benefiting from infrastructure projects such as Perth's Metro Net, Bayswater Train Station, and the $232 million extension of the Mitchell Freeway, the report said.

The industrial property sector continues to experience robust demand, both for sale and lease, with limited supply of new developments projected to push property values higher.

“The focus on land earmarked for residential property development is undoubtedly essential to relieve a housing shortfall. However, we are seeing very little in the way of new industrial property in the pipeline,” said Angus Raine (pictured above), executive chairman of Raine & Horne. “This is set to drive vacancy rates even lower – and they are already at near-zero levels in key industrial hubs including Liverpool and Campbelltown.”

In Southeast Queensland, a lack of available land for development is driving the value of secondary industrial properties higher. Despite this, the region is expected to attract more interstate and overseas migration leading up to the 2032 Olympics, increasing demand and maintaining upward pressure on property values in the absence of increased supply.

“The team at Raine & Horne Commercial Bankstown recently secured the sale of a rare industrial site in Belmore for $1.1 million above the asking price,” said Chris Nicholl, general manager at Raine & Horne Commercial. “This speaks volumes about the level of demand for industrial property.”