With interest rates low and quality investment options limited, 2017 saw a large increase in the number of small private investors seeking commercial property nationally. An alternative to residential or other asset classes, demand rose across most of the country for smaller sub $1.5million assets which offer attractive yields or improved rental potential. Owner occupiers also are evident in the market looking to shelter from rents and taking advantage of low interest rates, many purchasing through their super fund. This trend has been evidenced across Queensland’s Bayside market following robust sales volumes achieved over the last 12 months.
With speculation around possible movement in interest rates and greater regulation surrounding lending, we have seen some change in the motivation by these buyers in 2018. While demand still exists, the urgency has decreased resulting in longer sale periods and a more sensible approach to value and yield. Prime assets with strong lease covenants have been more immune to this slow down with greater scrutiny more so on secondary and vacant property, which is a move back to a fundamental approach to commercial property investing.
Over the last few years we have seen the increase in investment activity across the Bayside region. The Industrial asset class has historically been the most stable, showing a steady level of investment each period highlighting the owner occupier demand together with the local investor market. Over the last year however, we have witnessed this increase as interest has emerged from further afield, with small investors seeking assets around the country which offer an acceptable return. These buyers have been instrumental in creating competition and urgency around transactions and aiding in reducing yields, for both prime and secondary assets. We saw interest in Industrial at its highest in Q4 of 2017 with $18.58million changing hands across 17 transactions, resulting in an average selling price of just over $1million. The prior year resulted in $6.57million sold with an average price of just $547,500.