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Australian commercial property market notches up FY gains; Raine & Horne

Insights launch paper hosted by Ray Hadley, OAM, broadcaster on Radio 2GB Sydney and 4BC Brisbane.

Raine & Horne Commercial have announced the launch of their latest edition of Commercial Insights, a comprehensive look at how commercial property markets are faring across the nation.

Commercial Insights describes the three main factors driving commercial property: low interest rates, infrastructure projects, and a tightening supply of commercial assets.

Low commercial lending rates

Angus Raine, Executive Chairman of Raine & Horne Group, says, “Low interest rates are giving small- to medium-sized businesses a real opportunity to own their premises and enjoy security of tenure. As the asset is often held by the proprietor’s self-managed super fund, businesses can benefit from off-balance sheet financing while fund trustees have greater control of yields on their retirement savings.”

The positive impact of infrastructure

Mr Raine explains, “The impact of infrastructure on the commercial property market is not just significant, it can also be surprisingly far-reaching. Raine & Horne Commercial Erina (Central Coast NSW), for instance, is receiving enquiries from investors as far away as Western Sydney, who are hoping to capitalise on the NorthConnex project linking the M1 to the M2 in Sydney.”

Tight supply of stock

In state capitals such as Sydney, strong returns on residential property have seen a number of commercial assets earmarked for redevelopment as residential towers.

Mr Raine says, “This is reducing the pool of commercial assets available, and restricting the development of new commercial projects. The end result is a noticeable tightening of the supply of commercial assets.”

This trend is especially notable in Sydney’s inner west and south and the CBD, where values are being driven higher. As a guide, Raine & Horne Commercial South Sydney recently managed the sale of 401-405 Illawarra Road, Marrickville, achieving a sale at auction for $350,000 above the reserve price.

FY2017 capital growth of up to 30%

Commercial property is delivering varying gains around the country, and Sydney is recording particularly buoyant conditions.

Mr Raine says, “Commercial values in North Sydney are expected to rise by 15.0% for FY2017. Commercial assets on Sydney’s Northern Beaches could see an uptick in value of as much as 30.0% for FY2017.”

In the current market, savvy buyers can still find pockets of opportunity. Mr Nick Moloney of Raine & Horne Commercial North Sydney says the industrial area of Artarmon has potential for rezoning, which would create “significant capital uplift”.

Robust yields

“Strong yields on commercial assets continue to underpin activity among investors – both domestic and offshore,” says Mr Raine.

“Raine & Horne Commercial Brisbane North for instance, reports yields of up to 7.5% for A-grade industrial assets. High-quality office/commercial property is generating yields between 7.0% and 7.5%.”

Yields are being driven further by vacancy rates, which are at near-record lows in a number of markets. Mr Raine notes, “Vacancy rates in Melbourne can be as low as 2%, and this is giving reassurance to investors looking for income-generating assets.”

Commercial Insights launch – Sydney coming soon!
A second Commercial Insights seminar, also hosted by Mr Hadley, will be held on 9 November 2017 at the Westin Hotel, Sydney. To register your interest in attending the Sydney Commercial Insights seminar please contact Bill Russell, General Manager, Raine & Horne Commercial on 0411 274 425.

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