Commercial Property Market

Discussion in 'Commercial Property' started by Student, 4th Feb, 2018.

Join Australia's most dynamic and respected property investment community
  1. Student

    Student Well-Known Member

    Joined:
    12th Mar, 2017
    Posts:
    77
    Location:
    Sydney
    Interested to know views on the commercial property market. Does it follow a cycle like residential property? Does it have any relationship with the residential property cycle or is it more independent?

    Interested in views on where the commercial property market currently is in the various states.
    • New South Wales
    • Victoria
    • Queensland
    • South Australia
    • Tasmania
    • Western Australia
    Are there any good information or data sources in relation to commercial property markets and cycles and relationships with market factors or variables.
     
    Last edited: 4th Feb, 2018
  2. noogie60

    noogie60 Well-Known Member

    Joined:
    8th Dec, 2016
    Posts:
    146
    Location:
    Sydney
    The easiest place to start for a state of play is to read the public reports of the major publicly listed property trusts - Scentre, Goodman etc.
    Being publicly listed means they have to give a pretty comprehensive rundown of what they see of their markets in their reports and accounts

    All the major agencies like Knight Frank and Colliers also put out regular market reports and commentary
    Research Reports
    Property Reports | AU | Colliers International
     
    Last edited: 4th Feb, 2018
    The Y-man likes this.
  3. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,437
    Location:
    Melbourne
    There are many here who would be able to give better answers than me, but basically - yes there is a cycle, and it is not *directly* related to resi prop cycle.

    Comm props are usually valued on their tenants i.e. good tenant and long lease = higher value. Of course the location and the amount of land under it matters - but not to the same extent as in resi.

    Because the tenants are businesses, comm prop cycles are therefore more closely related to the business (or "share") cycle. However, there is a lag, as comm leases cannot be simply ended like resi ones can (unless the business goes bust). So even if business is bad, a tenant can't just stop paying rent.

    The Y-man
     
  4. Shady

    Shady Well-Known Member

    Joined:
    20th Aug, 2015
    Posts:
    523
    Location:
    Sydney
    Yes, it follows cycles

    Yes and No.
    Drivers of the residential property market can also drive the the commercial property market. The whole Demand/Supply thing again so Interest Rates; Economic Confidence et el. Commercial Property in Sydney started moving 2016 (give or take) where resi property started in 2012.


    Commercial Property is not rocket science or one of the 'dark arts'. It's no more difficult than investing in residential property
     
  5. Student

    Student Well-Known Member

    Joined:
    12th Mar, 2017
    Posts:
    77
    Location:
    Sydney
    Thanks All. That is helpful.

    Just wondering if on the basis that the residential market is easing, whether the commercial property market will also follow and ease prices.

    Are there any particularly useful leading indicators of where the market is heading.

    I expect that given the yield driven nature of commercial property that there is the potential for price falls as interest rates rise.
     
  6. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,437
    Location:
    Melbourne
    It is true that yields will fall if interest rates rise - but remember that commercials are generally leveraged much less than resi.

    As I wrote above, the tenants are more often the issue - if interest rates rise and tenants go under, then you are potentially left with a situation where the bank val drops dramatically, and a fire sale may ensue.

    It is quite easy to find cheap commercial property - a vacant one.

    The Y-man
     
  7. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,437
    Location:
    Melbourne
    Just to point out, similar to the resi market, there are many different types of commercial prop (actually more types than resi).

    For example office, "clean" industrial (warehouses), "dirty"industrial (chemical plant), retail, childcare, etc.

    All these can have different market cycles, related to the industry that feeds the tenants.

    The Y-man
     
  8. MorganHB

    MorganHB Well-Known Member

    Joined:
    8th Dec, 2015
    Posts:
    113
    Location:
    Sydney