The latest Commercial Insights report by real estate firm R&H confirms commercial property markets such as Sydney’s CBD are being impacted by new infrastructure projects.
“High sales volumes are being driven by low interest rates coupled with intensifying demand from self-managed super funds, overseas investors and business owners looking to purchase their premises,” said Raine & Horne’s executive chairman Angus Raine.
“Market conditions are most buoyant in those areas where major infrastructure projects are either underway or completed.
“The wealth of infrastructure developments across many parts of the country is having a major impact on commercial property values, yields and vacancy rates. In conjunction with historically low lending rates and incoming changes to superannuation, interest in commercial properties is coming from a range of investors – both local and offshore, as well as small to medium businesses seizing opportunities to own their premise,” said Mr Raine.
Principal of Raine & Horne Commercial Sydney CBD Christian Cirillo said: “Building upgrades and refurbishments have taken office space out of the inner Sydney market. So, despite the extra 320,000 square metres of prime office space at Barangaroo, there is a shortage of B-grade space in the CBD’s central precincts.”
Commercial property markets on the city fringes such as the Inner West and South Sydney are also being impacted by new infrastructure projects and business growth.
The South Sydney and Inner West regions are enjoying significant business confidence with revitalised industrial areas that are playing an important role in the local economy. Co-principal of Raine & Horne Commercial South Sydney/Marrickville Luke Smith said yields on commercial property in the area are currently 4.0-4.5%, and this is expected to remain stable throughout 2017.
Across the Inner West and South Sydney markets, asset values are expected to increase by 5.0-10.0% over the next 12 months, according to Mr Smith.
“In early 2016, we achieved upwards of $5,000 per square metre on a handful of transactions. By November, we hit a record $7,000 per square metre for a small freestanding property,” he said.
Owner-occupiers have been strong in the South Sydney market, accounting for 50% of asset sales as a growing number of business operators recognise the benefits of investing in their own premises. The area is also seeing significant interest from self-managed super funds across a broad price range spanning $1-10 million. These investors are usually seeking yields of 5.0%, which the area is on track to deliver.