We are confident that commercial property remains a great investment, especially as part of an overall investment portfolio. However, to answer our question, we first need to look at the bigger picture.
If you’ve been reading the news or following property experts, you’ll no doubt be aware of macro forces at work. Inflation is, at the time of writing, at 5.1%, the highest since 2009. Energy uncertainty, the war in Ukraine and east coast floods have combined to lead to shortages of certain foods, and food producers are asking higher prices for their produce to cover increased transport costs. The residential property market in most regions is tight, with a shortage of available stock exacerbating the current rental squeeze. In the US, the combination of conditions is likely to lead to ‘stagflation’, a term first used in the 1970s to describe high inflation and high unemployment due to the oil shock. The Federal Reserve, in efforts to combat inflation, is increasing interest rates faster and higher than predicted by the markets.
All the above factors might be thought to spook investors. However, in Australia, we’re seeing a slight reset in commercial property, especially A-grade and prime high-income-producing property in good locations as investors seek more predictable returns in a time of economic uncertainty.
What commercial property sectors are best for investment right now?
In a post-covid market, commercial operators are considering what they need to do to ensure maximum return on their investments.
While retail certainly suffered during covid, the lifting of restrictions saw a return to physical shopping, with Australia leading the way in the upturn. By contrast, both the US and the UK suffered a downturn in retail in the three months to March 2022. With the support of local and state governments, many retail outlets are making a move to the street. We expect to see a drop in household goods purchases and a commensurate increase in spend on fashion, and dining and drinking out of the home.
Commercial property observers are reporting a reallocation of capital back to offices, taking some of the glory back from Industrial. Owners of commercial offices are making it easier for organisations to get employees back to the office – if not full-time, then at least three days a week – with the incentives of improved air filtration, contactless door openers and outdoor space.
For industrial, mainly warehousing, we can say here that we felt no ill effects from the pandemic. In fact, these properties proved how essential they are. Currently, industrial space in capital cities is limited, leading to lessees planning any moves up to three years in advance.
What’s next for commercial real estate in Mount Gambier?
While there are headwinds for the Australian economy, our interest rates are moving upwards less aggressively than what we’re seeing overseas. Australia, connected to a largely stable region, is seen as a safe haven for investors.
As the property-buying frenzy of 2021 abates, with prices levelling in many regions, Mount Gambier continues to perform strongly both in residential and commercial.
Can we help with your Mount Gambier commercial property?
Call Herbert Commercial on 08 87 250 500 for a complimentary annual investment portfolio assessment. From this assessment, feedback may warrant the need to seek Herbert Commercial’s advice and expertise with formulating a plan to action restructuring or renegotiating the best lease scenario moving forward. We’re here to help.
As the only dedicated commercial property agency in Mount Gambier, we have a network with and are sought after by national commercial agencies as a trusted extension to their services. Our wealth of commercial knowledge of the Mount Gambier market extends to the broader commercial market, meaning we can ensure you achieve your commercial property goals.