Over the past year, it has become evident that evolution is crucial for the commercial market, as many sectors have had to adjust their operations due to the pandemic. The commercial market in Sydney has been particularly affected, with many workers opting to move to other areas like Queensland and WA, making it difficult to attract them back to the office.
As the resumption of international travel, hotel properties located in CBD are expected to become increasingly attractive to foreign buyers. Industrial assets are predicted to be in high demand until 2023, given the limited development options and rising rental prices.
Investors who capitalize on increased yields or vacant assets can reap the benefits of high-quality returns. Buyers who see potential for development or are willing to reposition or repurpose assets for future income and capital returns can also benefit significantly.
The expanding population has resulted in a beneficial effect on occupancy rates and profitability for certain types of assets, owing to heightened demand. Wise investors will monitor these population trends to help maintain low vacancy rates and optimize their returns on investment.
The market has experienced a slowdown in 2022 due to the swiftly evolving conditions, prompting many commercial operators to adapt their strategies to remain competitive. Investors, both domestically and globally, have become more cautious as the year progresses, with the escalating debt markets being identified as the primary influencing factor.
There are opportunities in alternative markets, particularly in the childcare sector which is currently experiencing a strong growth phase driven by demographics and increased federal funding. Childcare assets offer more extended leases and greater stability than other asset types. Although higher rates may have an impact on capital values, particularly for industrial assets of the highest quality that have little or no vacant space, the income growth may offset some of these effects.
As tenants gain confidence in the improving business environment, the market is expected to experience sustained improvement in the availability of high-quality office space and attractive leasing incentives through 2023 and 2024.
With the onset of global uncertainty, it is anticipated that leasing activities will decelerate in the first half of the upcoming year, followed by a revival in the latter half. Tenants are likely to persist in transactions as they adjust their real estate strategy to adapt to the increased prevalence of hybrid working. The prevailing trend of relocating to superior quality properties is anticipated to be the principal catalyst driving this shift.
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