As inflation and cost-of-living concerns impact on the economic outlook, commercial property investors are expected to stay cautious until interest rates peak in 2023. Following a tumultuous year in 2022 in which the Central Bank raised interest rates eight times, the commercial real estate sector concluded on a sluggish note, with transactions stalling and confidence progressively declining.

The Economic Climate

Investor confidence has been shaky in recent months due to economic turbulence, leaving many with diminished cash flow and borrowing power. This, coupled with warnings from the Reserve Bank about rising interest rates and falling consumer confidence, has created concern about rental yields and vacancy rates. However, there are some silver linings to this cloud – wages are growing, unemployment is at an almost 50-year low, and Australia remains a valuable asset for foreign investors.

One report revealed that foreign investment into Australian commercial property nearly doubled last year despite the potential risks associated with future market performance. Although office and retail sectors have been hit in certain locations, it appears as though demand for other asset classes such as warehouses and industrial buildings is on the rise.

Risk Versus Reward

Commercial real estate investments are riskier than other types of investments, however, the potential rewards associated with these risks are substantial. With rising demand from growing companies and industry expansion, there may be large returns on investment due to capital appreciation as well as higher revenue when leasing or subleasing the property.

Increased Demand

In recent years, demand for industrial buildings such as warehouses and factories has increased across multiple industries, including retail, hospitality, and logistics services. Investing can put you ahead of the competition and provide potential buyers more options, allowing you to optimise your profits in the future!

With increased consumer confidence and higher demand overall, 2023 looks like an ideal time for those considering investing in commercial real estate in. Taking advantage of present market conditions could result in larger investment returns in the future, so get in touch with the team at McGees today!