Commercial markets in southwestern Sydney have remained largely unaffected by the fallout from COVID over the last 12 months and, in fact, are booming, according to Daniel Krobot, Managing Director, Raine & Horne Commercial Macarthur.
Daniel says current average yields are 5% across the commercial market, with minimal change expected for the remainder of 2021.
Vacancy rates are around 5% for retail property, 2-3% for office space, and near-zero for industrial property. As Daniel explains, “Buyers are getting reasonable value in the Southwest in comparison to greater Sydney, and we are in a significant growth area.”
As evidence of this, Daniel says the Macarthur commercial market overall has experienced little impact from the pandemic, though the industrial market is “the standout”.
“The strongest market conditions in 20 years combined with a lack of stock across the board, minimal supply, and huge demand is driving the market higher,” says Daniel. As evidence, ‘The HUB’ 31 Lasso Road Gregory Hills, an 8,500sqm mixed-use strata development, was sold and leased out before the occupation certificate was issued.
Drilling down, Daniel said that around 80% of the demand is springing from owner-occupiers. “This demand is across the board because money is cheap at the moment, and business owners want to buy rather than lease.
“This trend to ownership is across the board whether it’s office space, industrial or retail. For example, the Hub in Gregory Hills is a mix of office with ground-floor retail. Office space is attracting a range of professional services firms such as accountants, solicitors, architects, and medical professionals moving to the Macarthur region to service the rapidly expanding population.
“We are seeing professional services firms from other parts of Sydney moving to the Macarthur region and establishing satellite offices, while trades-related business and warehousing are driving demand for industrial.”
As a result, vendors also need to understand the distinction between what an owner-occupier and investor will pay for a property, Daniel advised. “With the high number of owner-occupiers in the market, a vacant property is likely to attract more interest.
“If a tenancy is in place, you could be missing out potentially on hundreds of thousands of dollars as a vendor.”
Daniel continued, “On the flip side, due to a lack of stock, some owner-occupiers might be prepared to pick up the asset with the tenant in place and then try and negotiate the tenant out or wait for the lease to expire.
“We still have some investor demand but don’t have the stock to accommodate them. It’s the busiest market I have seen in 20 years in Macarthur. We need more new stock, and we’re still waiting for the release of thousands of hectares of industrial land around Kemps Creek, Leppington, and Bringelly.
“As a consequence, we have the situation where a half-acre block of industrial land which was worth $600,000 a decade ago is now worth closer to $2 million, which is good news if you’re considering a sale anytime soon.”
If you are considering selling a commercial property in the Macarthur region contact Raine & Horne Commercial Macarthur on (02) 4628 3455.