Many commercial property commentators won’t forecast the year ahead and discuss what and where they think you should be buying in 2022. What markets are hot? What markets are not? What should you avoid?
Nick Barlow, Valuer, Property Commentator and Commercial Property Expert shares his thoughts on the year ahead for the Australian commercial real estate market. Nick is totally unaligned with any real estate products, markets, or people. His commentary is well-researched by his team of valuers and analysts and is unaffiliated and unfiltered – he tells it how it is.
2022 Hits: Industrial and Essential Services Tenants
2022 Misses: CBD Office and CBD Retail
Another whirlwind year for commercial property once again saw the rise and fall of many commercial properties. With the 2021 lockdowns an unpopular topic, landlords were faced with nightmare arrangements and many tenants struggled to keep the lights on.
According to Nick Barlow, the commercial property market around Australia continues to be a favourable choice for investors especially for its higher returns when compared with other investment types such as residential.
“Industrial will continue to be the standout performer in the commercial sector well into 2022,” shares Barlow.
“We just witnessed a year of huge pressure for industrial land availability which increased growth and put further downward pressure on yields,”
“However, these growth rates will slow due to increased stock levels, already tight yields and the prospect of interest rate rises.”
According to Barlow, strong tenant covenants will continue to be sought after by investors and will be the strongest of the investment performers across all sectors.
“Essential services tenants such as medical, food and beverage, fuel and childcare have also been standouts and this trend is expected to continue for at least the next couple of years,” he shares.
“Yields have continued to compress as landlords seek security and a return that is still better than the banks can provide.”
In line with popular opinion, CBD office and CBD retail will continue to struggle, especially due to flow on effects of the continued work from home arrangements for many businesses. This is contrary to local retail which is benefitting with local shopping and the working from home phenomenon.
“Areas that will struggle will be areas with poor infrastructure, low government spend and high vacancy rates,” suggests Barlow.
“Small regional areas that enjoyed an influx of local travellers during COVID will see visitors returning to normalised levels throughout the year which will impact these markets accordingly,”
“Serviced apartments and AirBnb will also struggle throughout 2022 as they begin to feel the pinch of last year’s downtime and last-minute cancellations.”
Overall, Barlow sees a steadying of the current conditions where we have seen unprecedented demand and growth.
“Generally, in steadying conditions the better located properties will continue to be sought after and those in secondary locations which have done well during favourable conditions are usually the first ones to feel the effects when some of the heat comes out of the market,” shares Barlow.
Nick Barlow’s top pick for 2022 is Brisbane – it has better value than Sydney and Melbourne with activity ramping up due to the Olympics and continued interstate migration.