Hundreds of people tuned in to RWC’s final Between the Lines Live webinar for 2023, where our experts discussed 2023’s commercial market trends, and what’s in store for 2024.
Ray White head of research Vanessa Rader was joined by RWC Western Sydney managing director Peter Vines. The pair discussed the highs and lows of 2023, and what opportunities lie ahead in 2024.
Ms Rader said transaction volumes had been down in 2023, largely due to the rapid interest rate increase seen throughout the year.
Mr Vines agreed there had been a lot of inactivity.
“Whenever interest rates start to go up, the easiest thing is for people to sit on their hands and do nothing,” Mr Vines said.
“We have also seen a massive slow down in construction and projects not taking off because it's very difficult to make things work at the moment, especially things that were bought a few years ago, they just don't stack up anymore and people need a return on their money.
“There’s also been a cautiousness from people knowing times could be slowing.
“We’ve seen a slow down from investors but also people wondering if they’ll be able to grow their business. So a year of caution is really what we’ve seen.”
Mr Vines said the rapid increase in interest rates would come with a few more distressed sales.
“You can't increases rates this quickly without seeing more of those kinds of sales,” he said. “It gets to a point where you can’t hold on any longer.
“A lot of people saved money during covid, but they’ve spent that money now.
“I think next year will see more people say they can’t hang on any longer.”
He said he believed the pain from increased interest rates would continue to be felt in 2024.
“When rates rise like this consistently, they hurt, and instead of properties making you money, they cost you money,” he said.
“There’s interest rates but there’s also taxes, land taxes are at record highs.
“People start to think ‘I better have some conviction for this long term, otherwise what’s my reason for holding?’
“There are people out there struggling unfortunately, and I think that will continue next year.”
Despite these challenges, Mr Vines said there were plenty of opportunities in the commercial property market in 2024.
“There’s always good opportunity in any market, while there’s obviously some real challenges out there,” he said.
“Industrial was very strong in 2023. There’s clearly demand out there in certain areas, especially with the story of rents increasing.
“There will always be demand for good quality space, I think the larger players will continue to take market share and smaller players will find it more difficult to compete.
Ms Rader said existing product was king in the current industrial market.
Mr Vines said this was the case in almost all commercial asset classes.
“Whenever you don't have to build you’re taking less development risk and less construction risk, I think there’s very good value in that, not only in industrial but other asset classes as well where you can get in and refurbish something.”
Mr Vines said he was particularly bullish on blocks-of-units and other “beds” based assets.
“I love blocks of units, they’ve typically been a mum and dad style asset and, in a market of uncertainty, they have to be one of the best assets you can buy,” he said.
“We have a shortage of housing which will keep pushing your built form assets up.
“I’m exceptionally bullish on anything residential. I like houses as well, I like land, particularly near stations.
“Blocks of units are ready now, you don't have to get a DA, it's ready now and you can collect your rent. Even boarding houses and co-living spaces.”
While the outlook for 2024 is set to have its challenges, Mr Vines was positive about the future of the commercial property market.
“There is light at the end of the tunnel,” he said.
“There’s a huge amount of positivity in our market, you just have to hold on until we can get there.”
