THE PROPERTY DEVELOPMENT REVIEW
Based on your discussions with vendors / potential vendors, how are they observing market dynamics in your region & to what extent do you expect an increased volume of properties coming to market over the course of the year ahead. Vendors continue to be stubborn on pricing and market fundamentals. There remains a disconnect between vendor expectations and buyer appetite. However, transactions which are starting to occur are making these conversations easier for us. Many vendors will hold off for more rate stability and market confidence. We will see increased listing levels on the back of further rate stabilisation and as new sales flow through to re-establish the new market fundamentals. It’s widely forecast that interest rates have peaked or are near their peak - what impact will this rate stabilisation have on the commercial property sector. We are already seeing increased enquiry levels in 2024 and confidence with our purchasers. Further rate stabilisation will increase buyer demand and vendor confidence, resulting in increased listing levels and transaction volumes. In terms of cap-rates, where do you anticipate these will land in 2024 relative to 2023. Cap rates have softened albeit at a slower rate than many anticipated given the rate hikes we have seen over the past 18 months. Largely sector driven but I do not foresee cap rates softening much further given interest rate cuts are on the horizon. One of the defining themes over recent years has been the influx of private capital targeted into commercial real estate assets - how have you observed this thematic & what’s driving this investment relative to investment in other asset classes. I believe it’s been driven from the old school investment psychology of being able to drive past your property and own a physical asset. Many high-net-worth private investors have made a lot of money from commercial property over the years and will continue to prefer this over alternative investments. In closing, are there any other investment trends or market themes that you’re analysing that are likely to have a material impact on values in 2024. I think the main key theme everyone is watching for 2024 is interest rates. Should they remain at currently levels or move higher this will impact values.
February /March 2024 – 99
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