A total of $4.74 billion of commercial property transactions were conducted in the first quarter of 2023, 68.2% lower than the year before, according to data from Real Capital Analytics and Ray White.
Ray White Commercial Head of Research Vanessa Rader said “a combination of rapidly rising interest rates, difficulty in obtaining finance and sentiment shifts” had caused both vendors and buyers to “delay property decisions until greater economic and market certainty arrives”.
The breakdown of commercial transactions was:
- Retail = 41.5%.
- Hotel & leisure = 19.7%.
- Office = 15.4%.
- Industrial = 11.7%.
- Other = 11.8%.
Changing market reflects changing finance conditions
Ms Rader, who is one of Australia’s leading commercial property experts, said the commercial downturn followed two years of strong sales volumes, which were in part caused by “historic low interest rates and availability of finance”.
During that period, strong income gains for some asset classes also saw an increase in purchasers entering the market.
“As conditions have changed, we have seen many less experienced buyers leave the market, and many opportunistic investors jump,” she said.
“These buyers are moving with less urgency or are seeking out distressed assets or value-add opportunities at the right price. As a result, we expect to see volume this year remain subdued, while REITs [real estate investment trusts], funds and offshore buyers are likely to proceed with caution given the global banking turmoil which continues to unfold.”
WA supplants Queensland as number three market
Western Australia was the biggest market mover between the March quarters of 2022 and 2023, and became the third most popular state in which to invest, according to Ms Rader.
“We have seen a number of local, interstate and international buyers look to Western Australia and its economic strength and affordable price point as a market to speculate in,” she said.
“While Western Australia has recorded a major retail transaction propping up these numbers, strong population gains have resulted in improvements in occupancy for office and industrial assets, while an uptick in tourism has also seen hotel and retail assets grow in popularity with the expectation of future income return movements.”
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