SA MARKET OVERVIEW
SOUTH AUSTRALIA
SA Market Overview with Claudia Brace
Reflecting on 2022, what were some of the prevailing trends that you noticed and how did they play out in the market? When you think about 2022, you almost need to talk about the two halves of the year in isolation, because they were completely different from a real estate standpoint. Over the first half of 2022, the momentum in both the occupier space and investment space continued from the record levels of demand we observed in 2021. But as strong COVID-driven retail consumption against a backdrop of global supply chain issues created inflationary pressures in Australia, we saw the start of monetary tightening from the RBA. This impacted business confidence and put pause to a lot of business decisions on both the occupier and investor side over the second half of 2022. Some of the broad brush trends that were evident over the full 12 months of 2022 was the continuation of hybrid working. While Adelaide has some of the highest return-to-work numbers nationally, in Australia’s major economic hubs such as Sydney and Melbourne who experienced longer lockdowns, it has become more common for white-collar workers to work from home. This is forcing businesses to consider space efficiencies and just how much floorspace they require, while also catering to employee demand for higher quality space. The silver lining of all this is that the most agile property owners are now actively pursuing repositioning strategies, to cater to modern demands of tenants. The escalation of land values nationally was also a trend that spanned the 2022 calendar year. As a result we observed pressures on development feasibilities. This uplift in land acquisition costs was challenged by rising construction costs, lagging retail rents, inflation and the cost of debt. All in all, it was a challenging year for developers. Marketwise, what are you forecasting in 2023 and how will increased lending costs impact various markets? The volume of transactions for the first half of 2023 has decreased from what we have observed in previous years. The historically low interest rate environment that became the normal throughout 2020 and 2021 saw an extremely buoyant real estate market with availability of stock. Given Real Estate is sensitive to interest rate movements, in an environment with limited transactions and availability of stock we expect values to adjust. As assets are not homogenous, it is anticipated there will be further bifurcation of assets this year. Well-managed assets, bound by secure leases and/or quality covenants will retain value relatively well against most market conditions, but there has been a divide in non-incoming producing assets. There has been continued demand for retail assets, particularly those underpinned by non-discretionary income. We expect some gravitation to more stable assets in 2023.
CLAUDIA BRACE Executive, Sales & Investments JLL Adelaide
84 – June / July 2023
Powered by FlippingBook