SA MARKET OVERVIEW
SOUTH AUSTRALIA
SA Market Overview with Anthony De Palma
Reflecting on the last 6 months, what were some of the prevailing trends that you noticed and how did they play out in the market? The most significant trend that impacted the economy over recent times has been the continuous rise of cash rates and therefore affecting interest rates. They have significantly rose from January 2023 at 0.10% to todays 4.10%. As a result, purchasers are resetting their yield expectations and reviewing their equity positions with their banks. Each rate rise generally results in a purchasers borrowing capability being reassessed which is causing delays in pen hitting the paper as their ability to move quickly to secure an asset, unconditionally, is restricted. Another trend that continues is the insatiable appetite of Adelaide businesses to secure small office warehouse product throughout the market. Over the past 12 months, over 40 units have been completed with a 100% transaction rate. With the demand profile continuing, we expect developers to continue to seek out opportunities to construct small business parks as well as product to service the medium sized market (1,000 – 2,000sqm) where this is also limited amount of stock. With the amount of demand in the market, we are confident that any new construction will be soaked up quickly. Marketwise, what are you forecasting for the second half of 2023 and how will increased lending costs impact the various markets? We remain confident that a significant volume of transactions will be completed in the second half of 2023. The main qualification here is around supply – if opportunities come to market, transactions will occur. Plenty of owner-occupiers and developers are cashed up and seeking opportunities, while investors are re-pricing assets based on yield spread (due to the increased interest rates). Many of them, however are ready to pounce on opportunities immediately that meet their investment benchmarks. Overall, the increase in lending rates will have an impact on total project costs for developers, the return on equity for investors or the total available funds available to an owner-occupier. Each can have a tangible impact on the end outcome, so the market has to adapt accordingly.
ANTHONY DE PALMA Senior Executive - Industrial Leedwell
What market sectors do you anticipate being most in demand over the next six months?
Leedwell specializes in Industrial property and we have experience across all segments of the Adelaide market.
74 – July / August 2023
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