Brimming with people and businesses, Sydney is acknowledged as the financial capital of Australia that boasts of an advanced market economy. The vibrant capital city of New South Wales is particularly renowned for its booming manufacturing, tourism, finance and education sectors. The bustling city is home to the largest Central Business District in Australia and has various other commercial precincts in its suburbs, such as Chatswood and Parramatta.
With massive commercial activity taking place in the region, it has become the epicentre of global property investment. From high net-worth Australians to offshore tycoons, everyone intends to grab commercial real estate here for high rental yields and returns. Although the housing market has been experiencing a fair share of ups and downs, the commercial domain has maintained its upper hand and is going stronger than ever.
Thus if you are planning to invest in commercial property, then you must shift your focus towards Commercial Real Estate in Sydney, which has become the hub of towering business districts and A-grade offices. Here is a list of five factors that will inspire growth in commercial property values in the city in 2020. Let us take a look.
1. Surge In Foreign Investment
After the federal elections in May 2019 and the subsequent re-election of Scott Morrison, the political environment of the country has remained stable. The regulatory system has also been transparent with an established institutional framework which has piqued the interest of international investors in commercial property.
The exchange rate for the Australian Dollar has stayed favourable for the offshore buyers. The institutional investors have been eyeing the Sydney Light Rail, whose western Sydney line will be completed in 2023. Additionally, the recent political turmoil and protests in Hong Kong increased the number of property enquiries in Australia from the China-ruled city.
The violent demonstrations against the extradition bill have made many affluent buyers from Hong Kong find a safe haven in Australia as they already have the right to reside and own property here. Thus the funds will be flowing freely in the real estate domain and bring about a growth in its values which have already started happening by the end of 2019 in the fringe markets.
2. Interest Rate Cuts Strengthening Demand
The Reserve Bank announced interest rate cuts in 2019 to boost the economy. The cuts, along with the reduced mortgage rates, revitalised the housing sector in Sydney and Melbourne and improved the confidence of investors. It had a direct impact on the capital flowing into the commercial real estate segment since the debt costs were reduced.
The rise in enquiries and sales has been focussed on the office properties at present and is expected to engulf the retail sector in the coming months. The reason behind the high demand for offices in CBD is the redevelopment upside.
Also, many want to grab the prime properties to display an affluent social status. Thus the A-grade properties in the suburbs like Parramatta and North Sydney are being highly sought-after by industrial property seekers.
3. Population Growth To Push Retail Sector
Sydney is one of the most liveable cities in the world and has everything that makes living a comfortable life possible. From grand vistas to Harbour views and iconic landmarks like the Opera House and Harbour Bridge, it offers a wonderful backdrop for corporate offices and retail precincts.
Attracting a huge population of immigrants and professionals from other states looking for better employment opportunities, Sydney is becoming more crowded with each passing year. Naturally, this change has led to an upsurge in demand for retail shops, malls, cafes, restaurants, clubs, hospitals, etc. Thus the growing population is playing catalyst to the rise of the retail properties in the city.
The recent coronavirus scare has reduced the trading rate in various shopping hubs that were considered the stronghold of Asian buyers. However, the virus seems to be on the way of getting controlled within the borders of Wuhan city in China. It is expected to impact the tourism sector in a big way, but its effect on retail will be only visible in the coming months.
4. Increase In Infrastructure Development
The game-changing decisions in property investment are invariably dependent on the development of infrastructure in the surrounding area. Since the announcement of the revitalisation of the Central Precinct, the property sector has been abuzz with enquiries.
The better transport system and superior public spaces, office buildings and entertainment zones make buying property in Sydney a lucrative proposition for investors. Another grand entry in the zone is the Sydney Innovation and Technology Precinct in the Central-Eveleigh corridor which has already found an anchor tenant in Atlassian, one of the biggest software companies in the world.
The focus of the project is on creating a Silicon Valley-like epicentre for tech start-ups in Australia. Such initiatives will further amplify the values of commercial real estate in the city as more and more buyers will be vying to grab a piece of these properties.
5. Limited Supply And Low Vacancy Rate
While the office vacancy rates had hit a record low in early 2019 in Sydney, the figure is expected to ease slightly in 2020 to reach 5%. However, it is still much lower than the long-term averages, which will keep the rental growth positive. The vacancy rates have gone down due to the significant withdrawal of stock for government–based infrastructure projects and lower supply of new developments.
The job growth has been improving at a considerable rate and boosting demand for both A-grade and B-grade office set-ups in the city. Many of the office structures which were withdrawn in the last two years for refurbishment will be coming back in the market soon and will ease the vacancy rate a bit. However, the new supply is already pre-committed, so there will be not much change in the numbers.
For the most part of the recent real estate history, Sydney has been at the forefront of all the significant transactions. The trend will continue in the coming years as the economic and political conditions create a favourable environment for commercial property for sale in Australia.
Sophie Barrett is an experienced real estate marketing professional with a specialisation in commercial property market. She has a Masters degree in marketing from the esteemed Melbourne Business School and has several property management certificates to her credit. Her shrewd marketing policies and business acumen have led to the most rewarding property deals in the major capital cities of Melbourne, Sydney and Perth. She is a popular name in the real estate market and has been serving the industry for almost two decades now. CommercialProperty2Sell is proud to partner with her for some astute discussions and advice on the booming sector.
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