Melbourne’s Perfect Commercial Property Storm is Brewing
Article | 3min read
by JONES REAL ESTATE on June 17, 2024
Now is arguably the most opportune moment in modern times to invest in Melbourne commercial real estate.
Below are some of the factors that our experienced sales professionals believe could be setting up the Victorian property sector for one of its greatest bull runs in recent memory.
Sluggish COVID-19 recovery
Victoria’s commercial property sector is still rebounding from the lasting impacts of the COVID-19 pandemic. There is no denying this disrupted most verticals within the commercial real estate industry, causing widespread vacancies and a rental downturn.
However, this extended recovery period is precisely where the opportunity lies for investors and businesses that could trigger a sharp rebound, as there is still significant value in the marketplace, the likes of which might not be seen again for decades.
Residential land tax increases
Another factor that we are tipping to drive commercial property performance and sales volumes are the State Revenue Office’s recent increase to residential land tax, which in some cases is adding tens of thousands to people’s bill per annum.
These increases to land taxes, especially for properties in the $1.8m – $3m price range, are engineered to make residential investors sell, in-turn bringing more housing supply into the market.
Through these residential sales, this will inject fresh capital into the pockets of already well-established individuals and families that can be easily redeployed into other, more lucrative investments in verticals like commercial, retail and industrial.
Commercial market uncertainty
The current uncertainty across Victoria’s broader commercial property market, spurred by increases interest rates and vacancies, is creating favourable conditions for private sector investors.
Institutional players, who typically rely on borrowed funds, are adopting a more risk-averse stance. This cautious approach by large institutions leaves room for calculated seasoned and first-time private investors to capitalise on attractive deals that might otherwise have been snapped up.
Surging population growth rates
Melbourne’s nation-leading population growth will be another critical driver for this looming commercial property boom.
Generally speaking, as the city expands, so too does demand for new commercial and retail infrastructure in order to service the growing populous.
Off-the-back of our surging population, this should fuel demand for space and boost consumer spending, while also creating property development opportunities in various sectors such as retail, office spaces and industrial.
This correlation between population growth and commercial real estate demand underscores the strategic importance of timely investments.
Potential tax incentives and policy reform
Looking ahead, possible tax incentives and policy changes benefitting both local and international entities could further invigorate the commercial real estate sector in Victoria.
The State Government’s focus on stimulating economic growth through supportive policies may provide additional momentum to a market that is already stacked with potential.
Among these measures could include tax breaks for commercial property investments, or grants for developing new commercial spaces, enhancing the attractiveness of the Victorian commercial property market.
We believe that the timely combination of COVID-19 recovery momentum, capital reallocation, market uncertainty and population growth, coupled with the prospect of tax and policy reform is setting the stage for one of the strongest runs in recent history.
If you are considering commercial property as an investment opportunity, now is the time to act and secure a stake in Melbourne’s ever-changing market. For more information or to discuss your commercial property interests in detail, please reach out to us at info@jonesre.com.au.
Newsletter Sign up
Stay up to date with all thing Jones.