According to University of Oxford visiting professor of management practice Professor Andrew Baum, it’s possible for yields to stay low for some time and cause property yields to slide further. Consequently, the attractive yields can raise the number of individuals on the market for commercial real estate.
While there is a possibility for real bond yields to go up, Professor Baum says it won’t affect real estate pricing, unless it rises two percent or more. With the attractive commercial property rates, experts predict that the sector will face a busy year ahead.
Busy Year Ahead
According to reports, Australian commercial real estate will see an increase in demand, as investors see the sector’s potential. The most recent Property Council of Australia Office Market Reports predict that office and industrial managers are to benefit most from the surge in investors, followed closely by retailers.
The reports showed, moreover, that while there was a small rise in the number of vacant commercial spaces, businesses are likely to occupy any vacant spaces this year. Leasing agents confirm this claim, saying telco, Internet-related enterprises and new co-sharing businesses are quick to take up any available spare offices.
Hope for C and D Properties
The arrival of overseas entrants may put pressure on retailers and consequently, on rental rates. Investors, however, are still willing to pay high prices to get their products to the malls.
Sholto Maconochie, head of Australia real estate for CSLA says prime and secondary offices are set to outperform again this year. Melbourne, Sydney, and potentially Brisbane are likely to see the development, as these areas offer investor demand, declining vacancy and an effective rental growth of 5-13%.
Lured by scarce prime assets and office capitalisation rates at 5.8% lows, investors go after secondary offices or look into developing them into premium grade properties. According to experts, this can cause these property types to outperform other assets.