In the latest instalment of our deep-dive into the property industry, we round up essential reading for those keen to understand where Australian commercial property is headed next.
May 30th, 2018
The property fever that has gripped the nation of late has well and truly made it to Indesign HQ. Recently, we’ve taken a closer look at the state of the Australian commercial property market and what it means for design. We’ve also explored the growing importance of interdisciplinary communication and collaboration and considered the lessons that commercial property stands to learn from commercial design. Through this lens, we’ve made the case that a new ecosystem for Australian development is emerging.
This new ecosystem is characterised by openness and radical symbiosis, both of which enable all stakeholders to truly work together for the first time to achieve a common goal: innovation. The boundaries between the built environment disciplines – design, construction, and property and facilities management – are blurring, and the divide between each of these industries and the client and end user is more narrow than ever. This major shift is many things: it’s fascinating, it’s fresh, and perhaps most crucially, it’s driving all the disciplines to new heights. Innovation in design is peaking as property values continue to skyrocket, and the construction and facilities management industries have moved rapidly to adapt.
This 9 – 10 August, the inaugural FRONT event will strengthen ties between Australia’s built environment professionals and underscore the importance of breaking down the interdisciplinary divide. For two days, Sydney’s Carriageworks will become the number one destination for professionals wishing to broaden their horizons and deepen their understanding of today’s commercial and hospitality sectors. Following a jam-packed program of meetings, networking opportunities, and seminars, attendees will have all the knowledge, skills, and connections they need to get in front of tomorrow’s commercial industry.
In keeping with the future-facing focus of FRONT, below we’ve curated 4 pieces of essential reading that you need to understand where Australian commercial property is headed. Read on to see the experts’ predictions of what’s next for one of the country’s most dynamic sectors.
The average yield rates of A Grade CBD buildings have held relatively steady over the past few years, hovering round the 6% mark since 2015. Investors should be mindful that higher yield rates for similar A Grade properties can be found in fringe markets, of which the strongest performing are the Gold Coast at 8.15% yield, West Perth at 7.90%, and Adelaide Fringe at 7.75%.
As REA Group chief economist Nerida Conisbee writes for RealCommercial, the pattern of intensive foreign investment in Australian commercial property is set to continue. In spite of the downward trajectory of Chinese investment – thanks in large part to the addition of property to the Chinese Government’s restricted list – investors from the US and UK are expected to hold steady, if not increase, thanks to the perceived transparency, stability, and strong governance of the Australian market.
This may be particularly true in NSW and Victoria, where hotel transaction volume was exceptionally strong in 2017, accounting for 42% and 39% respectively of national sales greater than $5 million. Expect to see greater foreign investment in hotels across the country as tourism booms and demand for accommodation continues to grow; this expansion will not be confined to traditional urban tourist hubs but rather trickle down to “well-located regional or unique assets across New South Wales, Victoria, and Queensland”.
Read: Market Outlook: “What Developers Can Expect for 2018”, The Urban Developer
This is not necessarily a bad thing. Sustained growth is difficult to maintain, and 2018 may provide investors with a valuable opportunity to consolidate their assets and strategically determine their next move, instead of reacting with haste. The Urban Developer recommends particular focus on “baby boomers, first home buyers, and other owner occupiers”, noting that the wisest option for developers is to “move away from investor stock and begin thinking about how to create unique and different projects that will appeal to both future buyers and financial lenders”. If that isn’t an incentive for greater collaboration between property and design, we don’t know what is.
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