OPINION: The big threat to the commercial property market is that the economy will slow to a degree that dampens the demand for space and cuts values. But dislocation also creates opportunities.
The key challenge for Australian real estate will be adjusting to the new cost, and availability, of money. Whatever the outcome of the interest rate cycle, finance will be more expensive, and yields higher, than in the past.
At the same time, the ferment of interest in affordable housing, both from government and institutions, continues apace.“The old adage of ‘invest when the news is at its worst’ may just play out in 2023 and provide some very attractive investment propositions.
The new cost of capital will play out differently by sector, geography, and even by the nature of the property itself. “The value of office space has evolved post-pandemic to emphasise employee experience over headcount to space ratios,” he says. “It’s likely that capital values for premium and A-grade stock will exceed pre-pandemic numbers across 2024 and 2025.”has had a more dramatic wind back with average yields rising from 4.4 per cent in 2021 to 5.9 per cent in 2022 according to Ray White Commercial analysis reported this week by my colleague, Larry Schlesinger.
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