Why are Small Investors Lining Up for Commercial Real Estate in Regional Areas

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Why are Small Investors Lining Up for Commercial Real Estate in Regional Areas
Why are Small Investors Lining Up for Commercial Real Estate in Regional Areas

Australia has always been a land of thriving real estate sector with its vast expansive area and low population. Over the past few decades, the population in the country has significantly amplified, and there has been an influx of immigrants in various states. The stable economy and flourishing commercial sector have buoyed the lifestyle of the population. The metropolitan areas are now flooded with residential and commercial properties ranging from luxury mansions to affordable apartments.

The housing sector which was going through a boom until recently received a jolt. The stricter credit policy has put a brake on the mounting house prices. The changed real estate scenario proved to be a blessing in disguise for commercial properties which are now experiencing a sudden growth. The investors are currently looking for more secure options which are affordable and promise high yields. Thus all eyes are on commercial real estate for sale in Australia.

However, this time the focus is on the regional areas rather than the metropolitan cities. The reason behind this transformation is that the deals are being headed by small investors who are looking for a return on investment by making affordable purchases.

 

Regional Commercial Real Estate Is Easy On The Pocket

The small investors are more concerned about the cost-effectiveness of the properties as the yields are now surging in regional areas. The demand for office spaces has improved considerably over the past few years and the revenue of the industry reached $2 billion in 2018-19. The occupancy rates have been increasing and the rental income has followed suit.

The regional economies are moving ahead with rising population and low unemployment rates that allow people to afford a high living standard. The real estate markets are heating up as small investors are opening up to the fact that acquiring the same assets in Sydney or Melbourne is not possible with the skyrocketing prices.

Most of the properties in regional areas are available within the price range of $1million to $3 million. The property auctions that took place at the beginning of the year witnessed many regional commercial assets being sold to small investors. The buyers are aiming at grabbing properties developed by recognised brands so that they can capitalise on their value and affordability. From regional New South Wales and Queensland to the ACT, all the states are in demand when it comes to regional commercial spaces.

These investors are usually couples and mid-segment households who wish to invest their savings in some rewarding opportunities. Their payment capacity lies below $3 million and they seek assured returns. These buyers are particular about various details such as the tenants and the duration of the lease. These aspects of the property play a vital role in getting them sold to first-time buyers. Leasing a commercial property in Sydney vs. its suburbs is no longer as different as chalk and cheese. The development of the inner suburbs has turned the towns into high-potential zones which are generating an excellent income.  

 

Regional Towns To Lookout For In 2019

If you are an investor planning to enter the commercial real estate sector, then you must head to these upcoming towns in the heart of populated Australian states. The spurt in their growth can be attributed to the economic development of these suburbs as the population is rising and the demand for better living facilities and work atmosphere is taking precedence. If people are getting the same facilities in regional towns with a property at half the price, they are more than happy to relocate.

Towns like Ballarat, Orange, Mackay, and Launceston are driving the boom of regional areas. Other places include Echuca, Bargara, Ararat, Queanbeyan, and Swan Hill which have experienced the selling of many commercial properties in the past few months. The yield from some of the properties is close to 6% which is quite significant. Additionally, the percentage of enquiries for properties up for sale has increased by almost 30% for both retail spaces and office set-ups.              

 

The Property Segment Which Is Making Waves

While finding the most lucrative asset type for investment, experts found that 2018 saw an unexpected growth in demand for office buildings. However, the requirement for retail spaces plummeted in contrast to the demand for industrial and warehouse properties which grew considerably. The subdued interest in retail real estate is due to the declining percentage of consumers visiting shops since online shopping has become more popular.

Consumption in households is going down as the wages have not shown much improvement in the past year. Also, the discounts offered by online sites are a big distraction for consumers. Thus retail business owners are shying away from leasing big shops and are content with small stores with affordable rent. The rise in online shopping has amplified the need for storage which has stressed the demand for warehouses. Also, the space constraint in overcrowded cities has made industries come to the regional areas for storage houses.

The office spaces in metropolitan cities are not getting the desired attention from investors as they are not happy with the yield when compared to their exorbitant prices. Thus investors are directing their focus towards regional centres which are offering value for money. The diversity in assets available in the commercial sector has proved beneficial in maintaining an upsurge in demand from buyers.

While retail properties are going through a rough patch, the industrial and office spaces are looking positive. The vacancy rates in offices and warehouses are dropping and have reached to their lowest in 10 years. As the vacancy rates go down, the rental income goes up which has made investors take note of this change. Thus both inner and outer suburban areas are receiving more enquiries for warehouses and office spaces. Additionally, the job market is expected to escalate in 2019 which will further support the intensification of investments.

 

Conclusion

Small investors have a lot at stake, and cannot shell out massive amounts to purchase a property. Thus they are becoming interested in the low-risk commercial sector of regional towns which is yielding sizeable returns while being within their means. As a result, commercial property for sale in Australia has not lost its sheen in the wake of a stricter credit policy.                        

 

Author Info Manish Khanna

Manish is founder of Business2sell Group of Websites. 

Business2Sell.com.au is one of the leading business and franchise for sale listing websites. We work with our business brokers, commercial agents, franchisors and private sellers to help them connect with the right buyers for their opportunities. 

With website now functional in Australia, United States, United Kingdom, Canada, New Zealand and South Africa. We have over 18,000 businesses for sale listed, with over 220 Business Broker and Commercial Agent. 

I have over 20 years of experience in Web Industry; I have been involved in websites industry since the early years of 1996-97. In my professional career I may have worked for over 10,000+ websites. My Specialty is to build portals or complex online applications.

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