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In today’s article, we decided to swing a bit off the valuation subject and focus on the 2017 changes in the commercial property market in Sydney. There are a few new factors that have come together this year and gave us a promising outlook on yields and growth.
The recent report from Knight Frank shows highlights that 506,800 sq metres of stock was either created or refurbished in Sydney in 2016, compared to 225,200 sq metres across the rest of the country. However, this is still below ten-year averages, which means the demand is strong.
So strong in fact, that Knight Frank states vacancy rates are going to drop below 5% in some areas. This, in turn, makes prime yields compress significantly, leaving a lot of capital from overseas desperate for safer investments.
You will have stiff competition for commercial investment, but with potentially huge capital growth.
One of the most important problems for commercial investors is the increasing drought of commercial supply. Knight Frank says additions to the national commercial real estate supply are going to be few and far between in 2018 and 2019 before it picks back up again for a few years in Sydney.
Capital growth in Sydney's commercial is happening and it's happening now. That means to get in before supply really drops, you need to move with speed and decisiveness.
While Sydney is undoubtedly head and shoulders above the rest of the country when it comes to commercial real estate growth. This ongoing demand and lack of supply in the pipeline will have investors twitching their trigger fingers.