The COVID-19 pandemic has significantly impacted the Australian economy, with lockdowns and restrictions altering the way we interact with property, notably commercial assets.
While interest rates remain low and financing options are greater than ever before given the weight of funds in the market, we’ve seen some significant results across the commercial investment market including here in Queensland.
Some asset classes have fared better than others and there’s a disparity in results across various states and regions reflecting the extent of lockdowns.
INDUSTRIAL PROPERTY IN MUCH HIGHER DEMAND
The industrial asset class has been the big winner during COVID-19. The increase in online shopping has grown the need for logistic/transport and warehousing assets, particularly larger distribution facilities and smaller last-mile locations in metro areas.
Well-located assets continue to thrive, with vacancy levels falling and rents showing some improvement.
For the Sunshine Coast, which has seen a large population increase due to interstate migration, this sea change has also brought an increase in new business starts. Combined with small businesses borne out of COVID-19 job losses, these new businesses have stimulated growing occupancy in the industrial unit market.
IMPACT ON RETAIL DEPENDS ON TYPE
While supermarket and fresh food retailers have enjoyed an increase in custom, many hospitality businesses in some areas have had to grapple with takeaway and delivery options to keep the doors open. Large format retailers have had some surge in activity, as working from home has impacted electronic sales and demand for furniture, white goods, gardening and home improvement still going strong.
On the Sunshine Coast, locally-driven retail was a major focus while tourism-driven retail took a step back due to pandemic related border closures. A fast recovery in tourism-driven retail is expected now that a date has been set for the reopening of Queensland borders.
MIXED RESULTS FOR THE OFFICE MARKET
Nationally, the high overhead of office accommodation has led to some businesses looking to rationalise their space requirements, resulting in increased sublease vacancies over the past year. Major office markets like Sydney and Melbourne CBDs are some of the worst affected, however are expected to rebound given the trophy nature of the city and their assets.
The Sunshine Coast has escaped the trend of soaring office vacancy rates. Lifestyle, population growth, lower business costs and infrastructure investment continue to fuel demand, particularly for A-grade office space. For more details, check out What’s next for the hottest office market in Queensland.
INCREASING INTEREST IN ALTERNATIVE PROPERTY
Alternative assets such as childcare, service stations, data centres, medical and fast food have been growing in popularity over the last 10 years as investors seek higher-yielding options.
These assets have not been substantially impacted by the pandemic. Childcare continues to operate even during lockdowns, demand for medical and allied health services continues to grow and data requirements increase as we spend more time at home.
On the Sunshine Coast, we have seen a strong interest in mixed-use industrial premises, particularly those that can be used for the storage of leisure assets such as caravans and boats and mixed businesses. The healthcare sector is already the region’s highest employer and with Australia’s largest health infrastructure project currently being developed at Birtinya, demand for medical and allied health-related property is expected to be strong well into the future.
For a chat on local Noosa and Sunshine Coast commercial markets, call Ray White Commercial Noosa & Sunshine Coast North on +617 5474 7600.
Source: Ray White Now, Ray White Commercial, September 2021.