C ommercial BY RAY WHITE AKG
THE DEAL MAGAZINE DECEMBER 2021
CONTENTS 3
2021 INDUSTRIAL MARKET RECAP WITH ANGUS PAGE
5
2021 COMMERCIAL OFFICE MARKET RECAP WITH JAMIE DAVEY
7
LEASING NOW (FEATURED PROPERTIES)
9
SELLING NOW (FEATURED PROPERTIES)
11
JUST LEASED (FEATURED PROPERTY)
12
JUST SOLD (FEATURED PROPERTY)
13
WHAT'S THE OUTLOOK IN 2022 FOR COMMERCIAL PROPERTY WITH THE RAY WHITE ECONOMICS TEAM
15
KNOW THE TEAM
2021 Industrial Market Recap by Angus Page
The industrial market across Australia has witnessed unprecedented interest throughout 2021. The total investment volume for industrial and logistics real estate has reached almost $14 billion so far in 2021. This represents a 72% increase on the pre-pandemic high of $8 billion back in 2019. The high levels of investment capital into the sector has compressed yields and inflated prices to record high levels. The yearly net absorption of leasing space across the country is closing in on 4 million square metres, which is up from last years record high 3.3 million square metres. Furthermore, the vacancy rate is approximately 2% making it extremely difficult for tenants to secure any space that will suit their requirements. This level of competition has resulted in increased net rents and minimal incentives available. The growth of the industrial market across Australia can be attributed to a variety of factors. One of the major contributors is the growth of online retail. According to NAB’s Online Retail Sales report, in the 12 months to June 2021, more than $50 billion was spent on online retail in Australia. This represents a 56% increase on the previous year. In order to cater to this growth, online retailers have needed to source larger distribution and logistics facilities. Additionally, many companies have experienced supply chain issues due to COVID-19 and are now required to hold more inventory for longer periods of time. Supply chain disruptions have also made the sector aware of how reliant it is on China, which has resulted in an increase in the level of manufacturing in Australia.
3
So Where Are We Going? How Long Will This Market Last? High levels of investor demand and strong rental growth is expected to continue into 2022, underpinned by supply constraints, low vacancy rates, and the further expansion of e-commerce. Property prices are expected to experience continued growth even if yields begin to stabilize. This is due to occupier demand driving up rental rates throughout the industrial market. The supply of industrial space across Australia is not even close to satisfying the current level of demand. This market is predicted to remain strong for at least the next two to three years unless there is a significant change in global markets.
Angus Page Associate Director of Commercial
0433 627 769 angus.page@raywhite.com
4
2021 Commercial Office Market Recap with Jamie Davey Since the beginning of the Covid pandemic we have seen a dramatic shift in commercial office vacancy rates throughout the whole of Australia. Due to the various lockdowns along with the introduction of flexible work environments and businesses taking up the work from home model, vacancy rates rose to the highest level they have been in recent years. Although Queensland was relatively successful in the management of the pandemic, we were not immune to demand shocks and rental falls. The number of businesses contracting their lease obligations and the increase in sub lease space being offered, were large contributing factors in the rise in office vacancies. There was an increase in leasing transactions during the first half of 2021, but this proved not to be enough to return the vacancy rate to pre-covid levels. However, we are seeing an increase in demand for smaller office space, between 150sqm – 300sqm. These smaller office spaces are being sought after by businesses changing workplace practices or contracting into a smaller premises. Looking forward into 2022, there is a good indication that the office market will slowly begin to recover, but the general consensus is that office vacancy rates will remain above 10% until at least 2025, and rental rates will remain subdued for the short term.
5
There is an estimated 60,000sqm of new office space currently under development within the CBD and even more becoming available throughout 2022 in the outer suburbs, with only a portion of it being pre committed. With the introduction of the new office buildings, along with the office opportunities currently available, competition for tenants will remain high. In order to entice tenants into relocating or even remaining in their current space, larger incentives should be considered along with a reduced rental rate, at least for the immediate future. It is not all bad news however, once the international directives are confirmed and the borders are open, we will see an influx of larger office users looking to re-establish themselves within South East Queensland. So, even though we have not yet felt the full effects of the pandemic, there is a good indication that 2022 will be the year the commercial office market begins to bounce back.
Jamie Davey Associate Director of Commercial 0400 763 772 jamie.davey@raywhite.com
6
LEASING NOW
Featured Properties This Month OFFICE 31 Barklya Place MARSDEN $40,000 + Outgoings + GST Building: 180sqm Land: 304sqm
Newly Renovated Retail/Office Space Situated In Premium Complex Open plan office/retail space with ample natural lighting 180 sqm* Ducted air conditioning throughout along with full glass frontage Internal kitchenette and security system installed Private onsite amenities 3 phase power available
JAMIE DAVEY 0400 763 772
INDUSTRIAL 8 Distribution Court ARUNDEL
From $35,000 + Outgoings + GST Building: 172-1,082sqm
Multiple Units Available in Brand New Complex with Onsite Cafe Sizes ranging from 172sqm* to 1082sqm* Concrete tilt panel construction Each unit features LED lighting, 3-phase power and container height electric roller doors Showers and amenities in each unit with mezzanine
ANGUS PAGE 0433 627 769 7
LEASING NOW
Featured Properties This Month OFFICE 5+6/116-118 Beenleigh Redland Bay Road LOGANHOLME $147,000 Gross PA + GST Building: 420sqm
420m²* Showroom / Retail Tenancy In High Profile Location 420sqm* Total floor area Fit out incentives available for long lease terms Ideally suited for showroom retail, professional office, medical consulting or gym Full glass frontage with extra high ceilings
JAMIE DAVEY 0400 763 772
INDUSTRIAL 80 Darlington Drive YATALA
$115/sqm + Outgoings + GST Building: 5,950sqm 12,145sqm
Premium Corporate Facility With All The Bells & Whistles! 5950sqm to 12,145sqm on offer Massive 12.2m minimum warehouse clearance EFSR sprinkler system Multiple 6m wide roller doors and recessed docks 10m wide cantilevered awnings
ANGUS PAGE 0433 627 769 8
SELLING NOW
Featured Properties This Month INDUSTRIAL 19 Prosperity Place CRESTMEAD $4,888,000 + GST Building: 1,975sqm Land: 3,360sqm
Brand New Logistics Facility In Highly Sought After Area 1,920sqm* Total floor area 1,606sqm* High bay warehouse with 8 meter + clearance 277sqm* Corporate style office over 2 levels 3 Electric container height roller doors and 3 phase power
JAMIE DAVEY 0400 763 772
INDUSTRIAL Lot 19 Warehouse Circuit YATALA
CONTACT AGENT Building: 1,256sqm Land: 2,450sqm
Brand New A-Grade Facility in Prime Location New 1256sqm* facility on a 2450sqm* block 1019sqm* of clearspan warehouse 237sqm* of A-grade office space over two levels 8m minimum internal warehouse clearance Warehouse access via 3 container height electric roller doors
ANGUS PAGE 0433 627 769 9
SELLING NOW
Featured Properties This Month INDUSTRIAL 18 Prosperity Place CRESTMEAD $3,977,000 + GST Building: 1,563sqm Land: 2,800sqm
Brand New Warehouse Facility In Newly Released Industrial Estate 1,563sqm* Total floor area 1,375sqm* High bay warehouse with 8 meter + clearance 151sqm* Corporate style, ground floor office 2 Electric container height roller doors and 3 phase power
JAMIE DAVEY 0400 763 772
RETAIL 14/40 Browns Plains Road BROWNS PLAINS
CONTACT AGENT Building: 151sqm
Incredible Investment Opportunity! Annual rental return of $83,124.00 + GST Fresh 5 year lease that commenced on the 26th of November 2020 3% annual rental increases 151sqm of high quality retail space Extensive high quality fitout
ANGUS PAGE 0433 627 769 10
JUST LEASED
Featured Properties This Month INDUSTRIAL 2/34-36 Nealdon Road MEADOWBROOK $25,350 Net PA + Outs + GST Building/Land: 195sqm
LEASED BY JAMIE DAVEY! The tenant for this property had been looking to secure a second site for their expanding business for a few months now. It didn't take long after the initial inspection for an offer to be submitted at the asking price with favourable terms to ensure this great opportunity didn't slip through their fingers.
JAMIE DAVEY Associate Director of Commercial 0400 763 772 jamie.davey@raywhite.com
11
JUST SOLD
Featured Property This Month SHOWROOM 11/157 North Road WOODRIDGE
$380,000 + GST Building/Land: 205sqm
SOLD BY JAMIE DAVEY! There was a lot of competition for this site as it showed a great opportunity in a sought after area. Multiple offers were received and the was under contract within the first month of the listing going live. The owner and the buyers were both extremely happy with the final result.
JAMIE DAVEY Associate Director of Commercial 0400 763 772 jamie.davey@raywhite.com
12
WHAT'S THE OUTLOOK IN 2022 FOR COMMERCIAL PROPERTY? with Ray White Economics Team This year we’ve witnessed unprecedented levels of investment activity across the commercial property market buoyed by a combination of low interest rates, weight of money in the marketplace and the appetite for private investors (many of which firsttime buyers) seeking to diversify their investment portfolio. Given these robust results in sales turnover, investment yields have fallen to historic lows for many asset classes while vacant assets continue to transact and set new benchmarks in capital and land values. This flurry of investment activity has been countrywide with buyers focused on asset type rather than the adage of location, location, location. While for many this has been a successful formula but as we move into 2022 will this trend continue? We’ve seen interest rates movements by many of the large banks, independent of the RBA. While these are tipped to move upwards next year, is the money available in the marketplace looking for a home enough to keep investment demand at this high rate? The expectation is that sales volumes will moderate in 2022, not only due to the increased cost to funding but the underlying availability of quality stock coming to market. Many owners continue to ask the question, “if I sell, what do I do with the money?” and with bond rates still low many potential sellers will continue to hold assets.
It’s hard to predict the future for commercial property given the underlying shift which has occurred due to COVID-19 and the various lockdowns. The way in which we interact in commercial real estate has changed. From your local shop, working from home impacting our relationship with office space, to the continued increase in online shopping making demand for warehousing greater than ever before. Similarly, the population movements either interstate or regionally have changed the demand fundamentals in locations, however this may be a short term shift or a longer term repositioning for some locations.
13
Despite the unknowns, demand for commercial assets by occupiers will remain, which suggests that investment into commercial property will continue to be lucrative for investors not afraid to move up the risk curve. Into 2022 there are a few markets that are worth keeping an eye on and may continue to yield good results. Industrial Remains a Hot Sector The demand for industrial stock by occupiers is not anticipated to wane over the next few years. This will result in continued high occupancy levels which will pressure rents up and keep yields competitive. In some markets the vacant land shortage will keep resulting in land values appreciating while the growing costs of construction will be passed on, either by way of increased rents or capital values. Metropolitan markets with good population growth fundamentals as well as major road locations with good access will continue to be in greatest demand. Growing Popularity of "Set & Forget Assets" While assets like service stations and childcare centres have been popular for the last five to eight years, 2021 saw a dramatic increase in demand given their long-term returns on offer. Regarded as “set and forget” assets, these also include fast food and stand alone supermarkets and are often secured by a national brand with long leases with options. With tenants taking on all outgoings, this is considered a secure and low risk option which provides a consistent, longterm income stream. This year we saw many assets hotly contested via auction and achieve new lows in yield, the demand for these will continue into 2022. However, greater consideration on fundamentals such as location will be key to ensure you have a saleable asset upon the end of the lease term. Early identification of your exit strategy will be important for these assets to ensure you maximise your gains. A Focus on Health is Good News for Medical Property The medical sector has quietly grown over the past five years. The increased demand for sports and cosmetic medicine has seen more floor space taken up with medical use; we have seen adaptive reuse of retail assets breathing new life into local strips also. Purpose built facilities such as medical centres and day hospitals have attracted new levels of investment demand, and with COVID-19 shining a new spotlight on healthcare, tenanted investments will continue to be highly sought after. For many investors these assets have a somewhat future proof occupier which have high standards in regard to hygiene and safety giving buyers certainty of not only income but upkeep and maintenance. Queensland Confidence To Continue To Soar While this may be a broad prediction, you cannot discount the strong levels of interstate migration which Queensland have been enjoying over the past 18 months. While Sydney and Melbourne continue to lose residents to the warm climate and COVID-19 strict state, the growth in new business starts has been robust. A growing population fuels the need for all commercial property from retail, office space, childcare, medical etc. making it a key area to consider investing in. While Western Australia has also seen good levels of population migration, the volatility associated with the mining sector must be considered. This year we have recorded strong gains for the Perth industrial, retail and residential sectors which should not be dismissed. Interest in Convenience Based Retailing To Continue This segment of the market has also been growing over the past five years. Open air, small retail centres which offer the convenience of a supermarket and speciality stores have grown in popularity with investors as trade levels increase. The ability to park and access retailers with limited touch surfaces was appreciated during COVID-19 and supporting local businesses is important in many communities. These assets have seen yield compression, however often need to be repositioned to keep occupancy levels up given the difficulty some local retail markets have had. These assets often sit on large land parcels on major roadways which have attracted development interest further enhancing their value.
14
KNOW THE TEAM
AVI KHAN Director 0400 666 809
ANGUS PAGE
Associate Director of Commercial
0433 627 769
RACHAEL CURTIS
Director of Commercial Asset Management
0490 471 535
JAMIE DAVEY Associate Director of Commercial 0400 763 772
GENEVIEVE TREW
Group General Manager
07 3805 3108
Prepared by:
COMMERCIAL BY RAY WHITE AKG 15
For All of Your Commercial Needs
SELL & BUY LEGAL
0406 886 611 contact@sellbuylegal.com.au
sellbuylegal.com.au