THE PROPERTY DEVELOPMENT REVIEW
Private capital has played a major role in recent years—how have you observed this trend evolving, and what’s driving investment into commercial real estate compared to other asset classes? I haven’t observed a lot of private capital coming into the market, except for the acquisition of development sites, or providing funding for construction. Developers and investors are losing confidence in mainstream banks and are leaning towards private equity funding, even though it is more expensive, they can be easier to deal with and I am seeing a lot of this. Looking at key investment trends, are there any emerging market themes in 2025 that are likely to have a material impact on commercial property values? We are still seeing a big push for industrial whether it is small sheds of 90-150sqm, or large industrial warehouses. Office space is starting to come back strongly as employees are being urged to come back to work in the office and not from home. Confidence will have a material impact on the commercial market and that comes from putting the future Federal Election behind us, interest rate reductions, a strong economy moving through 2025 together with a strong stock market and continuing plenty of liquidity in the market for lending purposes. I see these as being the main factor, together with of course supply and demand driven by migration. Which asset classes do you anticipate leading the charge in 2025, and what factors will drive their performance? I continue to see industrial leading the charge as the most sought after asset, followed strongly by office acquisition, development sites and then retail. I believe retail will have a resurge at some stage, although we need the continued population growth to really drive that demand. Hospitality suffered enormously during and after the pandemic due to rising costs and staffing shortages, and of course the enormous cost of living pressures. We are seeing a lot of liquidation of retail tenancies at present. In the development site space, do you see more activity opening up in 2025, given the potential for interest rates and construction costs to stabilise or decline? The cost of construction will continue to have an impact on
their market. Every day we see articles about companies going into liquidation and the constant appearance puts fear into people’s eyes and erodes confidence. This, together with the actual cost of acquisition, puts huge pressure on development budgets. If you are on the beachfront, it’s well over $20,000 per sqm, whereas some time ago it was $12,500 - $15,000 per sqm. Then there are building costs that are double what they were years ago and so it is hard for a developer to make a profit. So do I see a real move in that direction? I see Southport as being good value on a rate per sqm. I see Surfers Paradise being great and Broadbeach being right up there. I think developers are going to look for other opportunities in less expensive areas and Southport will certainly lead the way there, whether it is BTR or commercial office. I have a lot of confidence in the Gold Coast moving forward, although they do face their challenges. I think interest rates will assist developers, although I don’t see a fall in construction costs yet. That may happen in two years time, but right now the cost of construction will probably remain where they are. In closing, the market faced challenges in 2024, including financing constraints, supply chain pressures, and evolving ESG requirements. Are there signs of relief, and what’s your outlook for 2025 ? As we move into 2025 we are still faced with finance constraints, supply chain pressures, and strong building costs and the relief will only come through from continuing demand, interest rate reductions and of course SEQ is poised to be the spotlight of activity moving towards 2032 Olympics, purely based on the employment that will be created, the affordability of housing compared to other hotspots in Australia and of course, lifestyle. I see 2025 as being a great year. Ray White Surfers Paradise recently concluded The Event 2025. Over the course of December and January we marketed 112 properties, culminating in a inroom auction on Monday 27 January. The Event is the largest auction program held each year across the entire country. As a result of this campaign, we have sold over $124,000,000. Over the 31 years that we have conducted The Event, this is the best result by a country mile and it is a reflection on the confidence in the Gold Coast and the continued demand for the Gold Coast.
February / March 2025 – 77
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