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Finding Commercial Property Gold in an Unpredictable Market

Finding Commercial Property Gold in an Unpredictable Market

Despite overall commentary indicating it’s a tricky time to navigate, there are still positives to be found throughout Australia’s commercial property market, according to experts from the commercial division of Elders Real Estate Australia.

Although recognising that declines in some capital values and instances of weaker investment yields are factors currently influencing the industry, Elders experts believe there is still upside to be found in commercial pockets around the country – namely Tasmania’s major cities and the Dubbo region of New South Wales.

We sat down with some prominent Agents in these regions to discuss in detail the current state of the market and the opportunities that lay ahead.

Opportunity Abounds in the Apple Isle

We spoke with Elders Commercial and Leasing Agent, George Burbury of the Hobart Office following the release of their recent quarterly report.

The View: What’s the overall feel of the Commercial Real Estate Market in your area at the moment?

GB: What we’re starting to see is a wave of capital enter our market. It’s fair to say a lot of capital has been sitting on the sidelines for the past 6-12 months, but with talk of rate reductions by mid next year, we’re beginning to see some confidence re-enter the market.

Industrial – We have a very strong industrial sector which is being driven by a lot of e-commerce businesses requiring distribution and storage warehouses.

Offices – From an office point of view, we have the lowest office vacancy rate in the country at a touch over 2%. We are in a high construction cost environment which is protecting the value of already established buildings, making Hobart and Tasmania in general an attractive place to invest.

Retail – Most of our neighbourhood shopping centres are full in terms of occupancy and performing well compared to national benchmarks. We are still seeing interest from national retailers wanting to enter Hobart in particular, while hotel and tourism numbers are almost back to pre-pandemic levels which supports this trend.

The View: What are the key factors affecting the market at the moment? 

GB: First and foremost, it is interest rates. Second would be more in the retail and hotel markets where cost of labour and less discretionary funds are applying pressure, although we see this easing as summer approaches. We have several major infrastructure projects happening at the moment highlighted by the $800 million Bridgewater Bridge Project and the talk around the new Hobart Stadium which would give a huge boost to the broader economy.

The View: What opportunities and/or predictions do you have for the market moving forward?

GB: With construction costs unlikely to ease anytime soon, the existing commercial offerings across Tasmania remain a really attractive investment option. We are seeing a shift in pricing when it comes to land opportunities, which means there could be some great land purchase options moving forward. We expect to see some rental growth in the bulky goods and office sectors and with a well-documented ageing population across this region, anyone wanting to develop and operate in the Aged Care sector has the chance to do very well.

Metro Investors Find Confidence in Regional NSW

Elders Commercial Dubbo Office Branch Manager, Andrew McDonald and Sales and Leasing Consultant Joe Waltham run us through how metropolitan capital continues to flow into the greater Dubbo region.

The View: What’s the overall feel of the Commercial Real Estate Market in your area at the moment? 

AM/JW: Our market remains incredibly strong. We’ve leased 8 commercial properties in recent weeks across a range of asset classes. It’s been much improved on the retail front of late, as we’ve filled vacancies in Dubbo’s Main Street and we’ve also had a couple of large office vacancies snapped up really quickly. To be honest, we’re probably at our lowest stock levels for many years, so that tells you that the market confidence is there.

What are the key factors affecting the market at the moment? 

AM/JW: Investors have confidence in strong regional centres like Dubbo. Metropolitan investors aren’t afraid to pick up the phone and contact us in search of top quality commercial assets. With increased prices in the metropolitan areas, investors are realising that large regional centres are very strong places to put their money.

What opportunities and/or predictions do you have for the market moving forward? 

AM/JW: Put simply, the city is going to boom! Dubbo is one of the first cities to be launched as a Renewable Energy Zone (REZ). REZs will group new wind and solar power generation into locations where it can be efficiently stored and transmitted across NSW. This is obviously going to generate an enormous amount of employment, with the government estimating it will bring 5,000 employees to the area, that is what all the buzz here is about at the moment. Those employees are going to need accommodation. For example, we currently have a 49 room former retirement village laying vacant where we expect to get plenty of interest, properties like this is where the opportunity lies.