Commercial Property Investment During Times of Uncertainty
Article | 3min read
by JONES REAL ESTATE on July 03, 2023
During periods of uncertainty, many property owners and investors find themselves at a crossroads – asking questions like ‘should I err on the side of caution?’, or ‘is now the right time to make a bold move?’.
The reality is, making a property investment play amidst speculative market conditions is as much a mental challenge as it is about assessing risk/reward profiles for different real estate verticals.
However, any seasoned investor understands that challenging times can present unique opportunities for growth, especially within the Victorian commercial property space.
In this article we will outline some commercial market segments to watch, as well as provide insights on why the next few months could be a sliding doors moment for growth-hungry local and international property investors.
What Property Verticals Should I Be Considering?
Our experienced Victorian commercial property sales team anticipates solid future growth opportunities for the retail sector.
Long-term tenanted retail properties, like food and beverage offerings, convenience stores and large-format supermarkets, through to specialised offerings for automotive, cosmetics and pets, as well as pharmacies should perform consistently in the next 24-months.
Our sale of 422 Collins Street, Melbourne, to a local retail property investor is an excellent recent proof-point to the current performance of the CBD bricks and mortar market.
For this campaign, we facilitated an international Expressions of Interest sales approach, geared towards driving enquiries across social and digital media platforms, which ultimately helped us achieve a sale price of $4,150,000. 422 Collins Street, Melbourne was sold by Paul Jones, Managing Director at Jones Real Estate.
Separately, a fast-food franchise experiencing a period of sustained growth is Oporto. Earlier this year, Paul Jones, Sam Guest and Luke Peric from Jones Real Estate brokered a deal that will see a new Oporto store take over the former Toto’s Pizza House at 99-101 Lygon Street, Carlton, along the vibrant hospitality precinct.
With Melbourne’s growing population expected to surpass Sydney in the next decade, this will be a likely driver of future performance and makes food and beverage retail a key market segment to watch from a growth-perspective.
Furthermore, the longer-term leases enjoyed by the retail vertical often drive additional value through regular, yet reasonable rent increases, adding extra padding to cash flow for the asset owner.
Other everyday essentials
The transition from the combustion engine to electric motors is underway, however significant community buy-in is still needed to meet the adoption rates required that will keep Australia on course to meet vehicle Co2 emission targets.
Therefore, traditional petrol stations equipped with electric vehicle charging facilities will likely maintain their position as strong investment opportunities – off-the-back of their strong lease average and annual rental income credentials – especially for individuals and groups in the well-established private market.
A terrific example of the impressive recent performance of the petrol station market is our sale of the BP service centre and adjoining Oporto in South Morang.
Located at 1235 Plenty Road South Morang, the property sits within a planned residential development zone along a high-exposure arterial that sees 20,000 cars pass it daily. These attributes helped it achieve a $10,350,000 sales price via an Expressions of Interest campaign led by Jones Real Estate Associate Director, Tim Spargo.
With Melbourne’s population trending upwards, demand for new childcare centres across suburban and regional areas will remain high, as service providers look to keep pace with the influx of residents.
As such, we expect the level of childcare requirements to grow significantly across Melbourne’s expanding growth corridors, particularly in parts of the Cardinia, Casey, Hume, Melton, Mitchell, Whittlesea and Wyndham local government areas – which are projected to be home to over 930,000 more people by 2036, according to Infrastructure Victoria data.
Development-ready land parcels
Recently we have seen an uptick in the amount of interest and transaction volumes for permit-approved land parcels in both CBD fringe and regional areas, with mixed-use zoned landholdings being among the most popular.
From a regional-perspective, growing coastal and country markets will likely remain popular as cost of living pressures in metro areas push people into less expensive regions.
In June, we were pleased to manage the successful Expressions of Interest campaign for a permit-approved 4,053 square metre land parcel in Cowes – the main township on Phillip Island in Victoria.
This sales campaign drove five offers from 74 enquiries after just 30 days on the market, thanks to our marketing strategy that targeted engaged purchaser segments across social and digital media. Follow this link to learn more about the Cowes property sale.
More broadly, housing affordability is a top priority for the State Government and developers at the moment, which is a driving force behind a surge in land acquisitions that will ultimately deliver new residences to undersupplied markets, with some projects championing a new wave of build-to-rent and other diversified housing models to improve affordable housing availability.
Melbourne CBD Market Predictions for 2023/24
Looking ahead, we have no doubt that working-from-home will still be an option across the employee landscape. But we expect some employers to start implementing tighter policies around this to help enhance collaboration and foster stronger cultures within companies.
More mandated in-office days will require employers to source more space, which could result in a spike in demand for commercial square metreage in established CBD markets.
A recent article by commercialrealestate.com.au revealed that more large-scale tenants are entering the Melbourne CBD market requiring floorplans of over 1000 square metres in premium towers, while demand for lower-quality stock was also picking up.
An exciting property the Jones Real Estate team will be bringing onto the market soon is Clarke House, formerly the headquarters of Guides Victoria.
This fully refurbished commercial property at 101 Clarke Street, South Melbourne, features excellent open plan workspaces, high-quality end-of-trip facilities, a large commercial kitchen and 12 on-site carparks.
It is also supported by convenient public transport infrastructure on Clarendon Street and on Kings Way, while being favourably positioned on the CBD’s fringe and surrounded by great amenity like the South Melbourne Market, which we expect will help it fetch $7,500,000.
Please consider the insights and advice listed above as general. If you are interested in learning more, or would like to discuss an investment or sales opportunity with our specialist commercial property professionals, please reach out to us at: email@example.com.