Research

The broader commercial property market has had some difficulties this year with reduced volumes and rising finance costs resulting in upward pressure in yields. While these pressures will remain for much of 2024, opportunities will emerge.

After a challenging 2023, with interest rate increases hampering investment activity affecting values, the outlook for 2024 will continue to be difficult.

In a time where creating vibrant workplaces is continuing to be difficult, both office owners and tenants are looking for more creative ways to get their staff back into the workplace.

The latest MSCI returns data for the year to September 2023 has recently been released, highlighting a downward turn in market conditions in the last quarter, but some asset classes have managed to weather the storm better than others.

The continued growth in finance has impacted all commercial asset classes with total returns down across most types and pressure on capital return greatest as investment yields rise.

Industrial has been the golden child of the last few years, accounting for the lion’s share of total commercial volumes. During this time we have seen some asset types’ interest dwindle, while others have surged in popularity.

Despite inflationary pressures, we are seeing the “revenge consumer” back at it, spending up on clothing, accessories, eating out and going on holidays together with growing their spend in the service sectors also.

The construction sector continues to be tough despite some moderation in costs seen more recently.

Industrial has been the commercial investors go-to in recent years. High demand for stock coupled with a limited supply pipeline and availability of vacant zoned land has resulted in strong increases in rents.

Recent data from the Foreign Investment Review Board shows a change in activity from offshore investors into the Australian commercial property market.

Recent data from Foreign Investment Review Board for June 2022, highlights foreign ownership of agricultural land has reduced the last two consecutive years.

There is no mistaking the difficulty across the CBD office markets in Australia, notably Sydney and Melbourne, with prolonged high vacancies of 11.5 per cent and 15 per cent respectively which are not tipped to improve quickly.