WA COMMERCIAL INVESTMENT ACTIVITY FINANCIAL YEAR REVIEW

The commercial property market has had an interesting ride since the onset of COVID-19. The immediate reluctance to transact followed by interest rate reductions and available finance which caused demand to soar across most asset classes across the country resulting in new highs in turnover. Supply chain issues causing construction costs to increase while demand for industrial stock has never been better showing quality rental growth during a time of high inflation. However, as we entered into 2022, caution had returned, the anticipated and subsequent interest rate rises resulted in many first-time buyers leaving the market, interstate speculators go home resulting in transaction levels to slow down to a more normalised level.

The outlook ahead will have mixed results, demand remains high for some assets which will continue to dictate rental growth and proving to be a safe hedge to inflation, while others will be hurt by the narrowing yield spread to bond rate as the cash rate continues to increase. Financing has become a little more difficult and yields will need to adjust given the interest rate projections. For WA, the strong economic position, high employment together with population gains will be positive for business growth and their accommodation needs. These market conditions are ripe for more experienced investors and may be come uptick in demand for vacant assets with development upside or repositioning opportunities albeit at the right price.