More money parked in commercial property as Newcastle 500 turbocharges retail opportunities

As I write, another year is ending, and the wind-up parties have commenced in earnest. So how did 2019 shape up from a real estate perspective?

More money parked in commercial property - Newcastle

Investment Sales

The prolonged low-interest rates have been filtering through to the commercial, industrial sector over the course of the year, and the shortage in the supply of investment real estate has seen aggressive competition for well-leased properties across ‘industrial’, ‘commercial’ and ‘retail’. More and more people are turning to real estate as a place to park their money.

Industrial

The year started strongly for industrial markets because of near record
low levels of vacancy rates. Vacancies in industrial space drifted up marginally through the first three quarters of the year despite the spot price for thermal coal dropping over the year from US$98.56/metric tonne to US$65.55. That said, the contract price is still around US$98.00/metric tonne, so it’s not all doom and gloom.

In the last quarter of 2019, values started to slow probably in line with escalating land prices as developers sought to capitalise by increasing prices. The sale of small industrial units has been robust for the majority of 2019, only steadying as supply volumes reach record highs.

Commercial

Commercial owner-occupiers don’t seem to have the same desire to buy property as their industrial cousins have shown in

This reticence could be partly due to the entry-level cost of acquiring a commercial office of $3,000 square metres to $5,000 square metres. Throw in the additional cost of a fit-out of another $1,500 square metres or so, and you get the drift. The leasing side for commercial has been steady but fragmented. The desire for on-site parking for staff and customers is still a significant priority.

The latter half of 2020 will see a significant increase in the volume of commercial stock available as landlords not briefed on the move by the NSW Governments consolidation to The Store are caught out and start looking for new tenants. The effect on businesses and landlords in the city will be far more significant than anything experienced by the Light Rail construction.

Retail

As Westfield, Stockland and GPT continue to protect themselves from the onslaught of online trading; life will continue to be tough on the streets. Strip shopping is suffering, and retailers must consider new ways to make themselves significant. However, this is difficult when one of the key drivers of bricks and mortar retail is the availability of parking.

Retail space is experiencing significant disruption not just in Newcastle and the Hunter region but across Australia. I’m in regular contact with agents around the country who confirm similar changes with more service businesses seeking strip retail space, which is resulting in a significant decline in rents.

Post written by Steve Dick
0425 302 771
steve@rhplus.com.au

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