Raine & Horne Commercial has unveiled its H2 2024 Commercial Insights Report[AO1] , revealing how the commercial property market landscape in Sydney’s regional areas are navigating the impacts of the cost of money and rising interest rates.

In the Newcastle and Hunter regions, Brad Wallace, Managing Director of Raine & Horne Commercial Newcastle says sales throughout 2023/24 have shown a softening of yields compared to the peak of early 2022.

As a result, there is plenty of supply in the rental market with diminished demand, leading to longer letting periods and higher incentives in a bid to secure tenants.

Meanwhile, high inflation and increased interest rates have also intensified uncertainty in the commercial property market this year, Brad adds.

But, on a more positive note, the inflation rate appears to be easing, and the RBA cash rate is at, or near its peak.

Brad says, “This gives investors more clarity to make decisions around purchasing commercial property. Should the central bank cut interest rates at some stage during the next year, it is possible yield compression may return to the market.”

Promising prospects for Port Macquarie

According to Graeme Garrett, Raine & Horne Commercial Port Macquarie Director, good levels of interest from both owner-occupiers, and investors is occurring in the north coast market.

“While the retail leasing sector is facing challenges, the industrial leasing market is still performing reasonably well,” he notes.

Port Macquarie's robust medical infrastructure is essential, especially considering the town's rapidly ageing population, where by the year 2040, the proportion of residents aged over 65 is expected to increase by 66%, he adds. 

Graeme says: “As the need for healthcare facilities rises, Port Macquarie’s commercial property market stands to benefit significantly, offering promising prospects for owner-occupiers and investors alike.”

South Coast market surge

In the lead up to the end of the 2023/24 financial year, the South Coast commercial property market experienced a surge of activity, with the industrial sector leading the charge, says Mathew Ivanoff Director of Raine & Horne Commercial Wollongong.   

Businesses looking to relocate from the Campbelltown Basin, in addition to local small businesses looking to expand, are leading the buying and leasing surge.

“Business owners are moving to the South Coast for lifestyle reasons and are either buying or leasing local properties,” says Mr Ivanoff.

Industrial sector drives thriving Wagga Wagga markets

Wagga Wagga’s commercial property market is thriving, led by the industrial sector, according to Craig Tait, Director of Raine & Horne Commercial Wagga Wagga. 

“Industrial sales and leasing have been exceptionally active over the past six months, with a record number of transactions through our office,” says Mr Tait.

Furthermore, he says this success is reflected in increasing industrial prices, a trend driven by a lack of supply. 

The area’s retail market has steadied but a lot of activity remains, he notes.

“This activity has plenty to do with the regional city’s population growth, with Wagga Wagga City Council forecasting that the local population will grow by almost 22% by 2046,” he says. 

Robust industrial market in Dubbo driven by scarcity of standalone warehouses

A scarcity of standalone warehouses for sale was driving a robust industrial market in Dubbo, according to Joe Burgun, Director of Raine & Horne Commercial Dubbo.

Rising land costs, coupled with a limited supply of shovel-ready industrial-zoned land releases by developers, continue to elevate values in the sector, he adds.

Thomas Haylock of Raine & Horne Commercial Dubbo says recent forecasts of stable interest rates until 2025 have driven investors to seek yields around 7% in retail and office sectors. 

A grade properties remain highly sought after by owner-occupiers who are not concerned about potential vacancies or investment returns, he adds.

Although average net yields for industrial properties in Dubbo are slightly lower at 5.5 – 6.5% than office and retail, purchasers are still attracted to industrial investments, Mr Haylock says. 

“Investors expect the continuing demand for warehouses and projected rent increases will make up for the tighter short-term net yields.”

For all your commercial property sales and leasing needs call your local Raine & Horne Commercial office today.