Australia has been on the radar of offshore investors for a long time for commercial property investment. As the population of high-net-worth individuals in the country is growing, it has led to an increase in million-dollar deals. The recent economic upheaval caused by the lockdown and the COVID-19 pandemic has not affected the resilient Australian markets.
The predictions of the downturn have been proven wrong by the commercial real estate market, which has continued to progress even after easing of the restrictions. Since the yield is better than residential properties and the lease terms are longer, most investors are making a beeline to invest in commercial real estate in Australia at present.
The country has been least affected by the pandemic, and business is back to normal in most of the industries. Thus if you are feeling sceptical about making an investment in the current scenario, then you must understand that putting money in commercial property is the safest choice. Here is why it is the best time to clinch a lucrative deal.
All-Time Low-Interest Rates
The Reserve Bank brought down the interest rate to 0.25 per cent to steer clear of a downturn, and it has worked wonders for the commercial property segment. Also, they assured that the interest rate will remain at the same level for an extended period. Besides the rate-cut, the RBA will be providing $90 billion to small and medium-sized enterprises in funding.
Commercial real estate has highly benefitted from this move as the sector has been growing steadily over the years and is witnessing positive returns. The vacancy rates in Sydney and Melbourne have been lower than expected, and Brisbane, Perth and Adelaide are emerging as booming markets for investment with more affordable options and competitive returns.
Several wealthy buyers from international destinations have put their money into this domain, such as the US-based Blackstone Group invested $1.52 billion in office towers above the Westfield Sydney. Many such investments were made in 2019 and have allowed the developers to avoid losses.
A Surge in Sales Post COVID-19
The transaction levels have not been affected and only a handful of sellers are staying away from the market. The prices have not shown any serious decline, and the auctions are back in full swing with growing participation from both buyers and investors. The recent shift of businesses towards online shopping has increased the demand for industrial properties and warehouses, which are experiencing a voluminous growth. The property agents have also become more communicative and going above and beyond to make the prospective buyers feel comfortable.
Most experts predict that the A grade properties in prominent locations will continue to offer the same yield even during the downturn. The online auctions have also made it possible for buyers to bid online and take virtual tours of the property without being present on the location which has helped in buying and selling.
Undersupply Is Increasing the Demand
The office markets in Sydney and Melbourne are experiencing low vacancy rates even when most businesses are opting to continue to work from home. It is because many new properties are still in the pipeline and will not hit the market before 2021. In fact, office properties will be least affected according to the emerging trends in the commercial property market in 2020.
Also, several existing properties have been withdrawn for refurbishment or redevelopment and will take time to return. Thus vacancy rates have not been affected in the cities and the demand for office spaces is growing among e-commerce businesses which are making huge profits and expanding.
Although it is being predicted that many companies will enforce work from home and may take their work online, they cannot completely shut down the physical presence of the entity. Many businesses need collaboration between employees to work effectively. Remote working may not be suitable for various management people who need to brainstorm and communicate constantly.
Thus they will need office spaces. Also, the business stimulus packages have allowed businesses to pay rent and retain their office spaces even while facing losses. It has helped in keeping the landlords safe. Some of them have also renegotiated their lease terms for a temporary period to keep their partnerships intact.
Industrial Property Sector Is Reaping the Benefits
The industrial sector has not been affected by the pandemic and sectors like mining are going from strength to strength. Most of them are in constant need of raw materials, equipment, and on-ground staff. The demand for some goods has reduced in the present conditions. Still, some other products have become highly popular, such as sanitisers, toilet paper, disinfectants, masks, gloves, face shields, cleaning supplies, etc.
Logistics and distribution in the retail sector have grown enormously as consumers are buying and stocking non-perishable items. Also, as spending on durables, travel and recreation has come down, people are spending more on fast-moving consumer goods. The shelves at retail stores are becoming vacant quickly, and thus, supply-chain has been moving at a faster speed to meet the needs of the market.
The sealed borders have also brought good news for local manufactures who will be gaining prominence as customers will have to buy more local goods now. Thus industries will be making a comeback and industrial property is going to soar in the coming months.
The Best Time to Invest
While some businesses have been affected by the lockdown, the pandemic has not been able to uproot the strong commercial property sector of Australia. Thus investors should view this period as an opportunity to make big gains instead of shying away from the auctions.
The record-low interest rates and less competition from offshore investors make it an ideal time to crack a high-yielding deal. If you are waiting for the prices to drop, then you are simply making a mistake as the prevailing conditions represent the tightening of the market in the coming months.
Also, we have the advantage of a low-risk market when compared with other economies across the world, which should infuse more confidence in buyers. With our success in controlling the spread of the virus, it is quite possible that we will be able to emerge victorious from this crisis pretty quickly.
While the whole world is concerned about the impact of the pandemic on their economy, we have been able to keep things under control with strategic measures and fiscal policies. Thus if you are planning to purchase a commercial property for sale in Australia, then this is the best time to go ahead without any apprehensions.
Sophie Barrett is an experienced real estate marketing professional with a specialisation in commercial property market. She has a Masters degree in marketing from the esteemed Melbourne Business School and has several property management certificates to her credit. Her shrewd marketing policies and business acumen have led to the most rewarding property deals in the major capital cities of Melbourne, Sydney and Perth. She is a popular name in the real estate market and has been serving the industry for almost two decades now. CommercialProperty2Sell is proud to partner with her for some astute discussions and advice on the booming sector.
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