Investors continue to have an insatiable appetite for industrial and commercial properties. Continued low interest rates, a relatively strong economy plus a lack of credible investment alternatives sees industrial commercial property keenly sought by investors. Yields will continue to firm as supply is constrained.
Enquiry levels from owner occupiers and tenant’s seeking new accommodation has skyrocketed. Not only is demand up from occupiers, the lead time to commit to property is shortening. Why? A combination of a few factors we believe.
- Pent up demand – companies previously taking a long time to act are now ready to do so, all around the same time.
- Companies are seeking a competitive edge and restructuring to gain efficiency. This is promoting change and real estate movements often are a by-product.
- Merger and acquisition activity.
- Lack of supply – companies are recognising that opportunities are few, so are moving faster in their decision making.
why is supply lacking?
- Savvy landlords are valuing tenant retention. Properties therefore are not reaching market.
- Direct deals. The growing pool of large corporates dealing direct with the big two landlords sees the number of direct deals continuing to grow. This vacant stock doesn’t reach the market.
The market all round is continuing to tighten and we see no evidence of a let up soon. Household wealth has increased following the strong residential market of recent years, retail spending is up (despite a declining dollar) and demand for warehousing continues to grow. So, what’s the take away? Companies should come to market with an educated view of what they require and be prepared to act swiftly. The back end of securing a deal now needs to be done up front, giving companies the opportunity to act aggressively in the current market to secure their preferred premises.
Author: Matthew Herrett
Matthew is a partner of Link Property Services in Sydney NSW. Jeff works in both Link Property Services Silverwater and Alexandria offices.