Investment activity in both the retail and industrial sectors has declined over the past 12 months
COMMERCIAL property values across Australia have dropped in the past 18 months in line with the global economy. Although the timing has varied, the decline has been observed across all capital cities and commercial asset types.
Melbourne and Sydney have fallen less than Brisbane and Perth, with the dichotomy in economic performance over the past three years amplifying the performance of commercial property.
As commercial property yields are affected by current rents and future rental growth, tenant demand and the volume of vacant supply are the major considerations when determining value. The availability and cost of debt and its relationship to the safe return of a 10-year government bond, provide the investment market an indication of the expected returns for a long-term commercial property investment.
Office markets have been among the hardest hit with values falling by 15 per cent to 25 per cent nationally. This has resulted in yields (rent/value) for prime quality assets increasing by around 100 basis points in most capitals from about 6 per cent to more than 7.5 per cent.
Melbourne and Sydney enjoyed relatively solid economic performance in the years leading up to the global financial crisis, which limited speculative activity and kept a lid on office floor space in the development pipeline. As a result, yields compressed to 5.5-6.5 per cent for prime assets as debt became increasingly accessible. Continue reading
Lush Dream Home 