Ray White Head of Research Vanessa Rader hosted the webinar, and was joined by Ray White Commercial Canberra head of industrial sales and leasing Frank Giorgi, and head of office agency Andrew Green.
The panel discussed how to understand investment into Canberra assets in a rising interest rate environment, how working from home and the government’s need for fully electrified accomodation has affected the office market, and what constrained land supply means for the future of the industrial market where demand outweighs supply.
Mr Giorgi said Canberra’s investment mostly came from private buyers, with institutional funds only recently coming into the market.
“In the ACT we have a leasehold system so you have a 99 year lease as opposed to actually owning the land,” he said.
“It does spook some foreign and interstate buyers as it adds an extra layer of complexity.”
But Mr Giorgi said Canberra was a great place to purchase an industrial property, with the ACT’s $1.7 million stamp duty threshold playing a part.
“ACT yields haven’t been as strong as Sydney and Melbourne and during Covid people did their research and realised Canberra was a great market to buy in,” he said.
“Rents keep growing and there’s a lot of demand with Canberra’s industrial vacancy rate sitting at one per cent.”
With Canberra’s low industrial vacancy rate, Mr Giorgi said new industrial development was needed.
“There is no industrial zoned land ready to go in the ACT,” he said.
“We have the land that can’t be residential land but the government keep throwing curve balls with environmental health studies.
“I want to see the town thrive and big business come to Canberra. We do have the land and it’s quite frustrating.
“We need 700-800ha of land now due to the demand and need to be releasing an extra one hundred thousand square metres of land annually to 2035 to cater for
population growth and the ever changing industrial landscape.
“People are often compromising on their buildings and could be so much more productive, but there isn't the land to accommodate those new builds.”.
In the office market, Mr Green said work from home culture had had a big effect on office vacancies.
“We have a lot of large Commonwealth tenancies here in Canberra, and work from home is what most government agencies do, with a hybrid work environment being really common,” he said.
“There hasn't been a push to go back into the office at the government level like there has been for private companies.
“Generally in the town centre there’s one or two government agencies that have always historically anchored the commercial market, and local cafes and businesses rely on those government employees to survive.”
He said offices in the sub-500sqm range had been performing well.
“When companies are committing to space, the stock we’re seeing move are ones where the lessor has spent the money on a building refurbishment, and in most cases a spec fit out, so the lessee can move in, plug in their IT, and get to work,” Mr Green said.
“Properties that have undergone a refurbishment and have new spec fitouts within the tenancies are fetching premiums.” Mr Green said there may potentially be several opportunities within Canberra’s greater office market in the future.
“There are a lot of buildings which might be 25-35 years old that haven’t had the refurbishment they need to attract quality tenants and their vacancy is starting to creep up.
“So a few of those buildings might start to come to market providing opportunity for those investors willing to spend some money and re-invest into the building.
“With refurbishment of the building - including common areas and end of trip facilities - and construction of spec fit outs, rental growth could increase by $150/sqm - $200/sqm from where the passing rents sit today.”
In the industrial market, Mr Giorgi said future opportunities relied upon the release of land.
“The more land that is released the more opportunity there will be,” he said.
“A lot of companies can come from Sydney, Campbelltown and Wollongong, where they are land locked and will look to Canberra and bring their workforces here.
“We just have to release the land in a timely manner. We’re still getting results in those five per cent yields, which is still historically low.”
