Making the right call on your commercial property…
We’re constantly asked about the current state of the market and what we expect to see looking forward. These are volatile times with rising interest rates, changing workplace dynamics, inflation and global uncertainty making it very difficult to make decisions regarding commercial property. Below is a snapshot of what we’re seeing in the market.
SALES
· Buyers, particularly investors are cautious, taking a ‘wait and see’ approach over the next 6 months to monitor interest rates as well as the broader economy.
· Investors are seeking higher yields due to the higher cost of capital and higher returns available on alternative investments.
· Due to low stock levels, pricing has remained relatively robust to date particularly in the sub $2m market with the lower price point available to more buyers and trading at firmer yields.
· Vacant buildings are holding up well with owner occupiers being the most active buyer group. We’ve seen strong demand for properties suitable for medical and allied health businesses.
· We expect to see more stock coming to market from receivers / mortgagee in possession in the next 12 months, though not at the same levels post the GFC.
LEASING
· We’ve experienced strong demand for office in the city fringe up to 500sqm, predominantly from Small Medium Enterprises (SME’s).
· Larger floorplates have been more difficult with many corporates still trying to assess their office space requirements following the pandemic.
· Office space with existing fit outs in place have been in high demand as the cost to fund and deliver fit outs has increased significantly for tenants. We have encouraged owners with prolonged vacancy to consider providing generic fit outs to assist with leasing.
· Despite strong retail expenditure over the past 12 months, retail leasing enquiry has slowed in the last few months as higher interest rates and cost of living pressures have begun to impact discretionary spending.
· Early engagement on upcoming retail expiries is essential, ensuring rents are at sustainable levels in order to maintain occupancy.
PROPERTY MANAGEMENT
· Repairs & Maintenance and capital expenditure is getting more and more expensive. As costs increase, it is important to seek second and third opinions.
· Tenant retention is key to maximising cashflow.
· Compliance with regulations is becoming more complex and requires constant vigilance.
· Nice guys finish last. It is important to be firm with tenants on arrears. A small problem can become much bigger very quickly.
Despite the market uncertainty, FY23 has been a strong year for Tewksbury Commercial with some outstanding outcomes achieved on behalf of our clients.
