There is strong demand for finance to support property developments across Australia, says non-bank lender Trilogy Funds.
The demand includes residential, commercial and industrial property projects and this means plenty of opportunities for brokers.
Trilogy Funds’ head of lending and property assets Clinton Arentz (pictured) said despite some current normalisation of the property market after two strong years of growth, demand was expected to continue for residential, industrial and commercial development.
“Property owners, businesses and developers reassessed their fundamental requirements during the past two years and property has factored into that,” Arentz said.
“In the residential space, we have seen people make a lifestyle shift and upgrade to larger properties with home offices, media rooms or more yard space.
“We are also seeing continued demand for new properties driven by low stock availability, expected increases in migration, record low unemployment levels and very low residential rental vacancy rates.”
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Arentz said the global pandemic lockdowns, China’s ongoing shutdowns and the Russia-Ukraine conflict had also driven supply chain disruptions and created pent-up demand for industrial property in particular.
“We are seeing companies related to online sales, the e-commerce sector and anyone in new tech ventures performing quite well,” Arentz said.
“From an industrial perspective, the investment appetite is rising steeply as interest rates are still low, supply is limited and the vacancy rate in industrial property is almost zero in prime markets.
“The demand for quality industrial space and specialist spaces such as cold-storage and freight forwarding are expected to continue for some years, providing opportunities for developers with access to well-located land and a strong understanding of their market.”
Arentz said there were opportunities for brokers to expand their services to commercial property developers and add value by being aware of some of the property development pinch points.
“To take advantage of expected demand, property developers and brokers are required to navigate changes in the property market,” he said.
“The simple fact is that it costs more to build now. Property values have increased around 15% to 20% over the last two years.”
Arentz said this trend normally happened over a five to 10-year period, so the construction and industrial property markets were playing catch up.
“As we have seen with global inflation and supply chain issues, upwards costs and volatility have entered the space,” he said.
“Couple that with the introduction of stricter legislation in certain states, means brokers need to adapt and become more aware of what their clients are seeking funding for.”
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Arentz’s advice for brokers was to plan well and have a well-rounded understanding of the commercial market.
“Make sure your clients aren’t jumping into a project they are unable to manage. Ensure they have the right team behind them, so they set themselves up for success.”
As a lender with a loan book of more than 150 loans spanning the eastern seaboard as at 31 May 2022 and diversified across residential, industrial, commercial and retail property developments, Arentz said Trilogy Funds had experience lending to a wide array of project types with different funding needs.
“Brokers should be aware that property values have strengthened, however it is important to ensure developers use the right valuer with the appropriate expertise for their project as property prices are moving rapidly in this market,” he said.
Arentz recommended brokers speak to Trilogy Funds’ dedicated portfolio managers in Queensland, NSW and Victoria who could talk brokers through these steps.
“Our portfolio managers offer personalised service and are happy to talk through the loan process, as well as sense check potential projects against a number of risk factors,” he said.
“We use our experience and understanding of market trends to structure the project and loan to help facilitate the best outcomes.
“Once the project is underway, we can provide other support from our portfolio managers and network of experienced consultants including valuers, quantity surveyors, lawyers, and agents.”
Arentz’s advice for commercial developers looking for opportunities is to surround themselves with a strong and experienced consulting team.
“In this changing environment, get the right design team behind you, allow plenty of time for projects to begin, the design needs to be coupled with cost control and align yourself with a good project manager and quantity surveyor to help with pricing and materials,” he said.
This article was written in partnership with Trilogy Funds
This article has been prepared for existing and prospective borrowers and brokers and provides information only about Trilogy Funds’ lending services. Trilogy Funds Management Limited ABN 59 080 383 679 AFSL 261425 is not a licensed credit provider and does not make loans regulated by the National Credit Code. The source of Trilogy Funds Management Limited’s loans may include managed investments schemes registered with ASIC, as well as other private lending arrangements with high-net-worth investors. If you would like more details on our investment opportunities, please contact us.