#44 Where’s Commercial Property Investing Headed in 2024?
Jan 5, 2024
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In this podcast, the hosts discuss different aspects of commercial property investing and explore market trends, yields, and growth potential. They highlight the importance of seeking expert advice and the benefits of investing in commercial property. The podcast also delves into the future of commercial property investing in 2024, including themes such as dropping interest rates and the performance of lower-value capital cities.
Different commercial property asset classes have varying market trends, yields, and growth potential.
Government regulations, incentives, and Australians' affinity for property investment are crucial drivers shaping the commercial property market.
In 2024, there are opportunities to buy commercial property at a good price, with potential for significant rent growth in the coming years.
Deep dives
Commercial property market in 2023
In 2023, the commercial property market had mixed performance with some key trends. The office market saw a significant increase in yields, with a 14.4% drop, as well as a rise in vacancy rates at 14.2% nationwide. Industrial properties, on the other hand, experienced strong rental growth, with yields expanding by 16% and vacancy rates at a tight 0.8%. The retail market remained steady throughout the year. The transaction volumes for the office market were down 77% from 2022 to 2023. Overall, the commercial property market showed resilience and continued potential for growth.
Factors impacting commercial property
Several factors played a role in shaping the commercial property market in 2023. The dynamics of rental growth differed between asset classes, with industrial properties benefiting from strong demand and rising rents, while the office market faced structural challenges with high vacancy rates. The impact of government regulations and incentives, as well as Australians' affinity for property investment, were crucial drivers. There is a trend of corporations adopting flexible work arrangements, and the availability of quality financial advice and depreciation benefits also influenced investor decisions. Overall, these factors highlighted the complexity and diversity of the commercial property market.
Outlook for 2024 and beyond
The outlook for the commercial property market in 2024 suggests a consistent and promising year for investors. Mortgage costs are expected to remain high, leading to a continued low supply of commercial properties. However, the growing number of buyers per property and the potential drop in interest rates in the future indicate a positive market for those looking to invest. Industrial properties are likely to see steady rental growth, while the office market may face longer-term challenges due to high vacancy rates. Overall, 2024 presents opportunities for savvy investors to find well-priced commercial properties.
Commercial Property as an Investment
Investing in commercial property is seen as a long-term strategy with potential for growth. Industrial assets are considered attractive due to surging rents and high building costs, making it a sensible choice for investors looking to park their money. Meanwhile, retail properties are stable with steady growth, making them an appealing asset class. The impact of rising interest rates on commercial markets resulted in yield decompression, particularly affecting lower-yielding assets like industrial properties. However, with interest rates expected to drop, commercial property still offers attractive yields and positive gearing, making it a desirable investment option.
2024 Outlook and Considerations
In 2024, there are opportunities for buying commercial property at a good price due to drops in prices of up to 15%. While cash flow may not be as high, there is still potential for significant rent growth in the coming years. Access to credit is improving, making it easier to finance commercial property investments. Investing in commercial property in 2024 should consider interest rate trends and the impending drop, ensuring that the property can cover the average interest rates for the next 12 months. The aim should be to build a diversified commercial property portfolio, focusing on high-yielding assets and taking advantage of the market being relatively quiet before the expected upswing.
Welcome to Episode 44 of the Inside Commercial Property podcast, with your hosts Scott O'Neill and Phil Tarrant.
In today’s episode, we delve into the different aspects of commercial property investing, discussing financial, economic, and market influences on the sector.
We examine different commercial property asset classes, including office, industrial, and retail, assessing their market trends, yields, and growth potential. The conversation offers detailed insights for investing in commercial property and emphasises the importance of professional advice.
Make sure to watch till the end as Scott and Phil provide their predictions for future market trends, making it a crucial episode for both experienced investors and beginners to the commercial property market.
Learn more about Rethink Investing:
Website: https://www.rethinkinvesting.com.au/
LinkedIn: https://www.linkedin.com/in/scott-o-neill-0b0aa151/
Facebook: https://www.facebook.com/rethinkinvesting
Instagram: https://www.instagram.com/rethinkinvesting/
Check out our book, 'Rethink Property Investing': https://www.amazon.com.au/Rethink-Property-Investing-Financially-Commercial/dp/1394188579
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