Commercial finance: the current state of play

by Madison Utley27 Jul 2020

The commercial property market has undoubtedly borne the harshest brunt of the lockdown laws which swept the country several months ago. 

While different sectors were impacted to various extents – some businesses pushed to extinction while others were able to operate largely as usual – commercial property specialists are still able to identify areas of opportunity in the new environment despite its clear challenges. Australian Broker spoke to a panel of such experts about how brokers and their commercial customers can stand to benefit from the new state of play moving forward.

According to Scott O’Neill, director of Rethink Investing and commercial property expert, the first step is taking time to understand the new trends in order to be able to respond appropriately.

“Coronavirus is forcing some businesses to change the way they operate permanently. For example, some are shifting so they don't rely so much on overseas manufacturing,” he explained.  

“Marketing spending may change, with less money spent on things like conferences and more funds going to online marketing. Retail shopfronts may find that operating 100% online could be a better financial option, and flexible work agreements will continue to grow.”

Commercial investors and their brokers must consider how these changes could impact commercial assets. 

“Some business in retail and office markets may find they need less space, as their businesses are not in growth phases, so this might cause rents to decline in these at-risk segments of the market,” said O’Neill.

“But I see strength in the industrial markets as local manufacturing grows and there is a greater need for storage as online sales boom. Many boutique medical and office commercial purchases are also performing strongly," he added. 

With competitive mortgage interest rates on offer, along with a broad range of high-yielding properties with long leases, O’Neill foresees commercial assets gaining in popularity again as investors turn away from residential markets that have a weaker outlook for growth.

“More people will flock to commercial for the cash flow that residential properties just can’t offer. This is contributing to capital growth, which has been evident in many markets throughout 2020,” he said.

 

For more on this story, check out Issue 17.14 of Australian Broker – out Monday, 27 July

 

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