The logistics and living sectors have dominated the commercial property market over the last year and a half. With decreasing office demand and stabilised industrial returns, there has been a notable shift towards retail assets. Despite previous expectations of the decline of brick-and-mortar retail, the sector has proven to be remarkably resilient.
Vanessa Rader, Head of Research at Ray White Commercial, recently wrote about this emerging commercial asset here and noted the following trends in her report:
1. Residential Market Trends:
Prices surged due to population growth and limited supply, impacting rents and vacancies.
2. Build-to-Rent (BTR) Growth:
BTR, co-living, and student accommodations are eyed as solutions, though development has been moderate.
3. Industrial Sector:
Continued strength with high demand, though returns are stabilising.
4. Retail Resurgence:
Retail assets led returns recently, driven by limited new supply and strong population growth.
5. Transaction Shifts:
Retail now comprises 41.1% of transactions, reflecting renewed confidence.
6. Evolving Consumer Habits:
The balance of physical and online retail, plus demographic changes, signals ongoing adaptation needs.
More about the Retail Resurgence:
The retail sector has shown unexpected strength, leading total returns for two consecutive quarters, with a 2.8% total gain in the most recent results. This growth contrasts the long-term perception of decline, as limited new supply and population growth have supported strong occupancy and rental performance.
Metropolitan assets are leading this rebound, with secondary retail properties yielding higher income returns than prime locations. This shift highlights renewed investor confidence in retail spaces, particularly those featuring diverse, service-oriented tenant mixes.
Are you a commercial property investor?
To capitalise on the retail sector's current resilience and growth trends, commercial property investors should:
1. Focus on Metropolitan Areas:
Invest in retail assets within thriving metro areas, where occupancy and rental returns are stronger.
2. Diversify with Secondary Properties:
Target secondary retail assets for potentially higher income returns than prime locations.
3. Anchor Tenants Strategy:
Prioritize centers with essential anchors like supermarkets and service-based tenants to ensure steady foot traffic and spending.
4. Monitor New Supply:
Leverage areas with limited new development to maximise rental growth.
5. Adapt to Consumer Shifts:
Stay aware of demographic and technological trends impacting retail consumption and adjust portfolios accordingly.
Looking to invest in the retail markets? Reach out to the CapStack.
A CapStack commercial mortgage advisor can be instrumental in helping you navigate investments into these sectors. By leveraging our deep market knowledge the team at CapStack can source optimal financing options tailored to specific sectors like the office, industrial, and living markets.
Whether it's securing and structuring optimised terms, or providing strategic insights into market trends, a CapStack advisor can help ensure that investors are well-positioned to capitalise on opportunities in Australia’s dynamic commercial property landscape.
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How can CapStack help?
An experienced business finance broker such as those at CapStack can help companies in the manufacturing, wholesale trade, and distribution sectors achieve their goals in 2024:
1. Securing Growth Capital: A business finance broker can help companies secure the necessary capital to invest in technology, equipment, and other resources needed to increase production and meet growing demand. This includes facilitating access to loans, lines of credit, and other financing options tailored to the specific needs of the business.
2. Optimising Cash Flow: Brokers can assist businesses in managing cash flow more effectively by arranging financing solutions like invoice factoring or supply chain financing. These solutions can provide immediate liquidity, allowing companies to manage operational expenses and invest in growth opportunities without cash flow constraints.
3. Navigating Cost Challenges: With rising costs due to energy prices, inflation, and interest rates, a finance broker can help businesses find cost-effective financing solutions. This includes refinancing existing debt at lower interest rates or securing funding with favourable terms that mitigate the impact of these cost pressures.
4. Facilitating Technology and AI Investments: To enhance productivity and competitiveness, businesses need to invest in advanced technologies such as AI and machine learning. A finance broker can identify and arrange funding options that support these strategic investments, ensuring that businesses can implement the latest innovations to improve efficiency and supply chain management.
5. Supporting Sustainability Initiatives: Many businesses are advancing their sustainability efforts, such as adopting renewable energy. A finance broker can provide access to green financing options, including loans and grants specifically designed for sustainability projects. This can help companies reduce their environmental impact while potentially lowering operational costs in the long term.
6. Financing Commercial Property Purchases: For businesses looking to expand their operations or establish new facilities, a finance broker can assist in securing commercial property loans. These brokers can navigate the complex landscape of commercial real estate financing, helping businesses acquire the necessary properties to support their growth and operational needs.
By leveraging the expertise and resources of a business finance broker, companies in the manufacturing, wholesale trade, and distribution sectors can effectively address financial challenges, capitalise on growth opportunities, and achieve their strategic goals in 2024 and beyond.
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Why CapStack?
When it comes to securing the right financing for your business or commercial property acquisitions and projects in Australia, CapStack is the partner you can trust. With unparalleled expertise, a vast network of lenders, personalised service, and data-backed insights, we are committed to your success. Get in touch with CapStack today and unlock the full potential of your commercial ventures with our expert property finance services.
CapStack can assist with bank, non-bank, or private financing. Start here to connect with us and send through some basic information to get the ball rolling or email us directly. Our lenders are Australia-wide and ready to fund investments acquisitions and development projects. CapStack help's developers and investors fill their capital stack by providing access to the capital puzzle piece they are missing. CapStack works directly with developers and investors who need access to capital markets.
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