In a continued trend from 2021, we have experienced continued high demand for quality development sites in proven regions in Q1 2022.
The demand came from boutique developers who were highly competitive and willing to take on more risky sites with a specific use/scheme.
Most active vendors were primarily private high net worth individuals and families looking to divest and redistribute their wealth to the next generation.
TGC sales team has started the year with multiple on-market campaigns, consisting of development sites in South Sydney and Western Sydney and commercial investments in the City Fringe, City North, South Sydney, and Western Sydney.
Quality commercial investments are expected to remain popular as investors hedge against possible inflation and avoid potential volatility across other investment vehicles.
An interest rate rise is a topic of conversation for a lot of investors, although the common thought is that the RBA are likely to hold off an increased cash rate until Q4 2022. Financiers are already adjusting LVR’s and debt cover for a potential interest rate rise, making it harder to secure finance if one is highly leveraged.
Historically, in the lead up to the Federal Election we have witnessed lower levels of commercial property listings on the market and believe this trend will follow throughout the first half of this year. However, post-election in the second half, we are expecting a market revival with a rise in the number and value of property transactions. During this period prices are likely to remain stable and comparable to the last 6-month period.
Throughout 2021 we have experienced a strong and rising demand for development sites, with the TGC team recording a total of $103,250,000 in development site sales. We believe this was due to the lack of quality sites on the market and an increasing appetite for developers to build their pipeline.
Developers over the last three years have been completing developments and now trying to increase their pipeline moving forward. The cost of building materials has increased by circa 25% over the last 18 months which is placing pressure on development profitability on current projects. We are seeing more builders becoming insolvent and expect some developers to follow suit. Watch this space.
Over the last two years, yields have tightened for quality leased commercial investments, in particular for childcare centres, service stations, medical centres, and roadside retail with strong covenants. We believe the drivers for this have been a combination of lower interest rates and increased volatility within other asset classes. This sector provides investors with a strong level of security. We see this trend only continuing.
In the strata market, small business owners were opting to buy boutique strata offices instead of co-working or leasing premises, as servicing a mortgage proved to be more cost-effective than rent in most cases. We have seen strata sale prices surpass $20,000/ sqm in the CBD.
If you’re looking to buy or sell commercial property in Sydney, get in touch with our sales experts via 1300 458 800 or info@tgc.com.au. Our team can also assist you with tailored leasing and property management services.
