Most experts are predicting a challenging year for commercial property in 2020, with key economic indicators suggesting a continuation of 2019’s market stagnation. However, Craig Mott, Regional Sales Manager for the Rawson Property Group says the outlook may not be as dire as many fear, with some attractive opportunities for investors who know where to look.
Here are his insights into trends to look out for, and how to capitalise on them in the coming year.
Strengthening rentals
According to Mott, 2019’s economic and political upheaval has resulted in a somewhat unexpected strengthening of commercial rentals.
“Many commercial renters who planned to vacate their buildings at the end of their lease period have chosen to remain where they are rather than putting their liquidity at risk in an unfavourable economic climate,” he explains. “As a result, the rental market improved in 2019 at the expense of purchases and sales.”
This trend, Mott says, should gain further ground in 2020, compounded by the relative difficulty of securing commercial property finance. However, he cautions investors to keep their expectations moderate, as commercial and industrial rental growth is still unlikely to break the double-digit mark any time soon.
“Businesses may delay buying that expensive property for a year or two, but they’re going to negotiate hard for a good deal with their current landlord in the meantime,” he says. “High vacancies mean they have the option to relocate to premises where they are offered more favourable rates if necessary, so landlords do need to be open to discussing terms.”
Re-centralisation to CBDs
“Rampant property development in key business areas over previous years has created an oversupply of office and retail space for today’s relatively slow demand,” says Mott. “As a result, we’ve seen unusually high vacancy levels stabilising rental rates, incentivising businesses to move back to central business areas in 2019 and 2020.”
While 2019 saw several projects focussed on gentrification and redevelopment of CBDs put on ice, Mott says a number of these developments are predicted to break ground in 2020. This, he says, should have a positive impact on the economy and create new opportunities for commercial investment in the area.
Evolving workplace dynamics
Remote work and work-from-home trends have taken off over the last decade. According to Mott, this is not only affecting the residential property market, it’s also directly influencing the commercial property space.
“We’re definitely seeing movement towards smaller offices as workforces disperse,” he says. “Large spaces are becoming more difficult to tenant and to sell. There has also been an increase in on-demand and coworking environments as people prioritise convenience and a balanced lifestyle over prestigious locations.”
This, Mott says, holds an important lesson for commercial investors, and could point the way to profitable opportunities in the future.
“Investors will need to adapt their commercial property offerings to stay relevant and manage their long-term risk,” he says. “Things like public transport, bus routes, restaurants, canteens and close proximity to the gym can drive demand and ultimately pricing. Those who tap into these and other emerging trends will find great opportunities for growth.”
Unusual asset availability
With the last few years of political and economic uncertainty, Mott says a number of commercial assets have come to market that would seldom otherwise be available. This, he says, presents a unique opportunity for those ready to make commitments and take the next step.
“There are definitely some great deals out there for well-informed investors with the flexibility and foresight to act quickly,” he says. “Taking advantage of the current climate to invest well, adapt intelligently, and create enticing offers for today’s workforce will place investors in a very strong position this year.”
Alan Straton
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