Host Vanessa Rader was joined by RWC Canberra’s Frank Giorgi and Dan McGrath to unpack the market activity seen during the start of the year in the nation’s capital.
Mr Giorgi said it had been a busy start to the year for the Canberra market.
“A lot of small leasing has been done already which is rare for the start of the year. People often have a new year’s resolution to move to a bigger premises or start a new business, and that seems to ring true,” he said.
“I can’t believe the amount of enquiry we’ve had across January and February. I think so far leasing is outweighing the sales as I think people are still a bit cautious about buying.”
Mr McGrath said there was an air of confidence returning to the market.
“Activity breeds activity, and it’s been the busiest and most buoyant start to the year that I’ve seen in 23 years of working in property in Canberra,” he said.
“The phones are ringing and people seem a lot more confident than they have been in the past two years - we’ve had quite a challenging past two years.
“I think people are just to the point where activity has to recommence and they’re feeling more confident about what’s to come over the next 12-18 months.”
Mr Giorgi, who specialises in the industrial sector, said the asset class had been very active across sales and leasing.
“There’s a huge shortage of the 1000sqm plus leasing opportunities. If you put something on the market you’ll get 4-5 enquiries straight away. We’ve had a really good run with 1000-4000sqm buildings, that’s where the shortage is in Canberra,” he said.
“Traditionally in Canberra they did a lot more smaller warehouses in the sub-1000sqm and even on bigger blocks they did unit complexes. We had a shortage of unit blocks 4-5 years ago, so with the latest land releases were flooded with people doing unit developments.
“We’ve had 200-300 units between 180-300sqm come on in six months. That smaller end of the market you’re spoiled for choice.”
He said industrial sales had seen interest from both owner occupiers and investors.
“In a recent 28 unit complex we sold together, we saw a real mix of buyers, including investors from Melbourne and Sydney, but it’s mainly owner occupiers,” Mr Giorgi said.
“The banks are favouring owner occupiers at the moment. They have to put less of a deposit down than the investors.
“Owner occupiers dominated sales in that complex, but we saw a lot of investors coming through as well.
“That would be unheard of a few years ago, you wouldn't have investors coming in and buying vacant sheds. They bought them off the plan six months before they were complete.”
Mr McGrath said interstate investment into Canberra seemed to be increasing.
“Interstate investment has only been a small pool of investment historically in Canberra, but I think that’s starting to shift now. People are understanding that Canberra is attractive,” he said.
“It’s hard to get into the other markets and it’s expensive to get into the other markets. We have a stamp duty threshold here of $1.9 million, anything under $1.9 million is stamp duty free.
“We do have a leasehold system here which I think sometimes confuses people, but it really makes no difference.”
Along with industrial, Mr McGrath said alternative asset classes were also performing well.
“Childcare is still really strong which I think goes along with the demographic here with 70 per cent of our workforce in public service. So those mums and dads going to work have a need for childcare,” he said.
“Service stations and those sorts of assets don’t come up very often. Frank and I did sell one late last year where we sold four sites in one line, one of them being a service station, and we got a record price there.
“Everything seems to be attractive at the moment, it doesn’t matter how long your WALE or lease profile is, if you have the right tenant and it’s in a good location it seems to do well.”
Mr Giorgi said small retail spaces were popular with investors as well.
“Retail spaces around 100sqm at a shopping centre or strip mall are really doing well,” he said.
“They usually fall below the $1.9 million stamp duty threshold, it’s usually got a 5-9 year lease in place, and the tenant is often someone who has spent money on a fitout.
“Investors are seeing a lot of value in those retail spaces.”
While interest from private investors is growing, Mr McGrath said institutional activity was waning.
“We’ve seen institutions pull out of Canberra over the last 12-18 months,” he said.
“Around 15 years ago you could lock in a lease to a Commonwealth department with the expectation that you’d roll it over, but that doesn’t happen anymore.
“There’s a precedent being set there and institutions are becoming very nervous in that regard and they have pulled out of Canberra.
“The bigger transactions that have happened in Canberra in the $20-50 million mark have been local high net worth individuals or families.
“They’re the ones who understand the market, understand the planning, and understand the tenant profiles.”
