After a year that saw both rents and values across the commercial property sector continue to grow, 2023 is shaping up well with a range of opportunities for investors according to Ray White.
Here are the top five predictions for commercial property in 2023 from Ray White:
Demand for quality commercial assets to increase
Sales volumes are expected to remain subdued throughout 2023 given the increased cost of finance according to Ray White. While many buyer types will retreat, savvy investors will capitalise on increased yields or even vacant assets, albeit at the right price.
Buyers who see development upside in an asset, or are willing to reposition or repurpose an asset to capitalise on future income and capital returns, will be rewarded. Remember that while commercial property markets are historically volatile, over the longer term they can yield an investor quality returns.
Follow the population for growth potential
Over the last year, strong interstate population flows from Sydney and Melbourne into Queensland and to some extent WA has pushed more investment into these states, Ray White said.
Growing population and increased demand has had a positive impact on occupancy levels and returns for some asset classes. This is notable across multiple sectors, including industrial property, retail and office assets, as more residents results in a greater need for logistics, transport fast food, office spaces and childcare.
Savvy investors will follow these population movements to aid in keeping vacancies low and income return more favourable.
Retail assets to undergo a transformation
Retail assets have been evolving for many years and COVID just sped things up, according to Ray White.
Services will continue to move into retail strips with medicine and food services becoming particularly more prevalent. Retail centres will continue to evolve, offering more entertainment options suited for newer generations with options like Ninja Warrior and esports.
Food will continue to be an attractor, however services like childcare and co-working office spaces may take up some larger holes if and when vacations occur.
WFH to stick around
Markets such as Sydney and Melbourne continue to have a hard time engaging their staff back into the office on a full-time basis, Ray White said.
This will dampen absorption levels and keep vacancies elevated over the short term as well as hinder rental increases or incentive reduction. Confidence in office markets in growth zones such as the Sunshine Coast and the Gold Coast – which have benefited from population gains – are likely to remain keeping occupancy rates up and future prospects sound.
Owner occupiers continue to look for industrial assets
The low vacancy situation across the Australian industrial market will continue into 2023, given the current limited development pipeline. This will put pressure on rents to grow and create uncertainty for small businesses according to Ray White.
The continued need for a range of industrial assets from small units through to large distribution centres will see occupiers take greater control of their accommodation needs despite growing financing costs. Business owners will continue actively seeking assets to suit their current business needs, sheltering from possible increases in rents.