- Investors in Australian real estate have remained active in the sub-A$5m commercial market.
- So far in 2023, sales of properties worth less than A$5m have generated over A$17bn, despite a general slowdown in commercial property sales.
- High-net-worth investors will be interested in the potential of lower-value properties, especially given the current state of the real estate market.
Australian real estate firms have noted strong transaction volumes within commercial property sales, despite the impact that higher interest rates have had on the global real estate market.
From January to May 2023, Vanessa Rader, Head of Research at Ray White Commercial, has recorded over A$17bn in sub-A$5m commercial real estate sales.
Due to economic uncertainty, real estate sales decreased steadily over 2022, with A$9.1bn worth of transactions recorded in the fourth quarter. Rader observed that caution had been taken by both vendors and buyers when making decisions regarding property.
However, global commercial real estate investment remains an active market, especially for properties valued at less than A$5m.
In the past 12 months, investors have been attracted to small retail shops with an average price of A$1.01 million, an opportune investment for high-net-worth individuals (HNWIs) looking to expand their investment portfolio.
HNWIs active in this market can leverage their buying power to acquire properties that might offer higher returns than more significantly priced properties. To do so, they will need a secure online money transfer service to aid their transactions when purchasing properties overseas and expanding their portfolio.
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Although there have been many conflicting reports on the future of retail, Rader has noticed that investments in suburban shop fronts have been particularly strong, resulting in A$3.7bn in assets being traded this past year.
Rader states that industrial freeholds and units remain popular investments for international buyers, including from the UK and Europe. Prospects are vital when considering offers that sit within the sub-A$5m price point.
She noted that industrial units have become popular among HNWIs, first-time investors and business owners seeking to avoid high rental prices.
Meanwhile, residential properties have been the most active asset class among more significant development sites across all zoning categories, with industrial properties not far behind.
Owner-occupier operators and seasoned investors see older-style overseas motels as an attractive redevelopment opportunity, mainly when domestic travel and tourism are prevalent.
Rader noted that investors were still interested in more specialised properties, such as service stations and childcare facilities, due to their long leases and “set and forget” nature. Additionally, showrooms and regional pubs were also seen as attractive investments.
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