NSW MARKET OVERVIEW
NEW SOUTH WALES
Jordan McConnell - National Director, Joint Head of Sydney West & National Head of Premium Investments | Investment Services
Thank-you for the opportunity to share your insights as part of The Property Development Review publication - what are the key trends occurring across the Premium Investments and specialized commercial asset classes so far in 2024. With continued market forces flowing on from 2023, driven by an increased interest rate environment, inflationary pressures, and rising construction costs, 2024 has witnessed purchasers broaden their search for move viable projects with reduced risk exposure and higher returns. One notable is the focus on regional and semi-regional locations, where land acquisition costs are significantly lower than traditional markets. In these areas stock availability and competition are not as tight, allowing for more efficient and cost-effective development approaches. Underpinned by population growth, decentralisation and new land releases have paved the way for specialised assets such as childcare, fuel and quick service retail (QSR), all of which are experiencing considerable demand from the market. Reflecting on the deals that you’ve transacted in the first half of the year, how are you observing market sentiment amongst commercial property investors & do you anticipate any material shift in sentiment or activity over the course of the next six months. Q1 2024 commenced with a hive of activity and a general confidence towards
the market; this sentiment plateaued heading into Q2 with construction costs and inflation not stabilising as many had anticipated. These factors were further influenced by suggestions of additional interest rate rises expected later in 2024. We expect that the second half of 2024 will see some of the more conservative purchasers adopting a more cautious “wait and see” approach to purchasing. With this said, we are still observing many vendors planning to head to market over the next six months so we do expect transactions to continue, especially given the substantial number of private purchasers with cash reserves waiting to make acquisitions. This activity is expected to be seen across the majority of the specialised commercial asset classes as well as more traditional development/ investment sectors. In terms of capital, what’s driving buyer interest into premium investments and specialised commercial asset classes over & above more traditional real estate sectors. Continuing the theme of shifting focus to regional locations, buyers are finding that by adopting a more decentralised approach to developing and investing in specialised assets, they are able to generate comparative or even higher IRR on these projects. For example, a childcare developer can acquire a larger parcel of land than they would in a metro location, alleviating the need to incorporate a
JORDAN MCCONNELL
22 – July / August 2024
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