THE PROPERTY DEVELOPMENT REVIEW
There has been a thirsty appetite from these investors. Increasingly we are seeing a lot more interest from interstate buyers. Amongst these are institutional buyers with access to deeper pools of equity and who are prepared to bid up prices for the larger, prime-grade and ‘value-add’ assets. In addition our company’s Asian Markets team has seen a steady growth in the number of Asian based investors entering the Adelaide commercial market. Asian investment in commercial property is continuing to mature and grow, marking a departure from their former focus on residential property investment and development here. What types of assets are most in-demand given the current environment? Overarchingly, we are still seeing demand for quality income-producing assets. Properties with strong lease covenants and properties with ‘value add’ opportunities continue to attract interest from a wide range of buyers. Development sites are still on the radar however some developers are
taking a more cautious approach as lending tightens. What are your expectations for the commercial property market over the next twelve months? We expect demand for premium assets to continue however we expect that rising interest rates will likely have an impact on the lower end of the market where smaller investors want to avoid short-term uncertainty after a surge in property prices. We anticipate that the rise in interest rates will affect smaller, secondary class assets where buyers rely on a higher debt share. Cost of construction is also a factor that many builders and developers are mindful of. Some softening in cap rates is predicted which have peaked in recent years. The cost of funds is likely to impact transaction feasibility as lenders more closely scrutinise lease covenants and vacancy risk amid rising interest rates and an economic downturn. We predict the high incentive levels may have peaked across our key markets and we should start to see
some strong rental growth come back into property. Talk us through the most significant deals you have transacted during the past 12 months. The below constitute some of the larger deals we have transacted • 21-35 King William Street, Adelaide $11M Amalgamated development site of 2,626sqm with short-term holding income. • 153 Flinders Street, Adelaide $14.9M 4 Level office building with moderate vacancy • 139 Frome Street, Adelaide $11M 4 Level office building with high vacancy
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