Restaurants and coffee shops feed Sydney market appetite
The darling of 2013 in the property market proved itself to be the residential market, with development sites also hot.
For commercial, retail property sales were still in demand, office sales were positive and office leasing remained stable.
The outlook for 2014 shows signs of complexity due to the current Australian macro-economic strength, the Reserve Bank’s strategy and our present government’s overall policies.
The most important factors impacting the market are unemployment rates, interest rates and the international economic environment. Domestic unemployment may still climb, with interest rates due to fall.
Turning internationally, the United States is continuing to recover and China is in a sustainable position.
Looking towards the next 12 months, we can forecast that freehold retail properties are still in demand, specifically in the $1-$20 million range.
These properties are favourites with foreign investors, particularly Asian investors. Small size strata offices, from 50 sqm to 300 sqm are still on the market, with prices remaining the same.
As for commercial offices, strata buildings in Sydney’s CBD are limited stock, and small business owners in professional service industries prefer to pay interest rather than pay rent that is not for their own investment.
Currently prices range from $4,500 per sqm to $6000 for a C grade building, $6500-$7000 per sqm for B Grade buildings and from $8000 above for A Grade. We’re unlikely to see any drastic changes to these trends in 2014.
In terms of strata shops, there is minimal stock for sale on the market in the Sydney CBD area. Return on such premises was between 6.% to 7.5 %.
For 2014, this trend looks likely to continue. Retail shops in prime locations in the CBD such as Pitt St and George St are always marketable.
For freestanding buildings, especially property with redevelopment potential, we will continue to see demand. However, similarly to strata shops, there will be minimal stock coming onto the market this year. As with 2013, we can see the main stream of commercial investment in the year ahead coming from overseas.
The rental market for commercial offices and retail, which was flat in 2013, will remain the same. Due to increasing land value, development sites will go from strength to strength.
As a result of the online shopping trend, retail vacancies are set to increase further. However, space for food retail, restaurants, and coffee shops are still well sought after.
