LJ Hooker Commercial Magazine October 2024

COM MERCI AL INSIGHTS

TRENDS

OPPORTUNITIES

OCTOBER 2024

The Sttrength of the Sub-$ Sub $5m $ Commerc cial Prope erty Market

Reshaping the e Asset Manager-Inve Manager Inve estor Relationship

CONTENTS INTRODUCTION & INSIGHTS

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CASE STUDIES The Strength of the Sub-$5m Commercial Property Market

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Reshaping the Asset Manager-Investor Relationship

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OPPORTUNITIES QLD

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NT

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ACT

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SA

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NSW

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LJ HOOKER COMMERCIAL OFFICES

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L to R: LJ Hooker Group CEO Christine Mikhael with Chris Stewart and Justin Eastwell

Welcome to Commercial’s Spring Edition Welcome to the spring edition of our Commercial Magazine.

As strange as it is to say, we are now in the home stretch of 2024.

At this time of year, investors and business owners are often looking forward to an end of year break and coming back in the new year.

If you’ve earmarked 2025 to divest, purchase or review your commercial property investment strategies, our LJ Hooker Commercial specialists are available to help you make informed decisions.

downward. Material and labour shortages continue to pose challenges for Australia. However, many observers continue to pursue long term plans, seeking out investment opportunities, scaling up businesses and expanding operations.

While there are no guarantees, some economists are predicting multiple cash rate cuts in 2025, following the lead of several central banks elsewhere.

In this edition of Commercial, we look at the continued interest from high-net-worth investors and SMEs in the performance of the sub-$5m market and trends in asset management on pages 4 and 6.

Talking to our LJ Hooker Commercial business owners around Australia, markets are very tight. The recurring observation is a lack of stock on the market. Interest rates have affected borrowing capacity, but wellestablished investors and business owners are still active, especially in anticipation of greater competition in 2025.

The Group’s elite commercial performers were celebrated: Top Commercial Salesperson (Value) 1st Chris Stewart, LJ Hooker Commercial Toowoomba 2nd Ryan Jennings, LJ Hooker Commercial Bankstown 3rd Aaron Ward, LJ Hooker Commercial Macarthur Top Commercial Salesperson (Transactions) 1st Deb Grimley, LJ Hooker Commercial Coffs Harbour 2nd Chris Stewart, LJ Hooker Commercial Toowoomba 3rd Justin Eastwell, LJ Hooker Commercial Toowoomba

1st LJ Hooker Commercial Bankstown 2nd LJ Hooker Commercial Toowoomba 3rd LJ Hooker Commercial Macarthur

1st LJ Hooker Commercial Coffs Harbour 2nd LJ Hooker Commercial Toowoomba 3rd LJ Hooker Commercial Adelaide LJ Hooker Commercial Adelaide Metro – which includes LJ Hooker Commercial Adelaide – was also recognised as a top performer in property management.

Congratulations to all our award recipients. Across LJ Hooker Commercial, we have top performers across all commercial property disciplines who share a common commitment to delivering outstanding client service.

At LJ Hooker Commercial, we have more people in more places to service your commercial property needs. I invite you to reach out to your local LJ Hooker Commercial sales and leasing agent or property manager to discuss your own needs in this changing market.

We recently held the LJ Hooker Group’s International Awards in New Zealand.

Tom Donnelly Head of Commercial LJ Hooker Group LJ Hooker Commercial

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CASE STUDY: LJ HOOKER COMMERCIAL ADELAIDE & SOUTHERN GOLD COAST

Newton, SA

Sub $5m Market Boosted

by Rate Cut Predictions The prospect of multiple interest rate cuts in 2025 will drive further interest in the sub$5m commercial property market over next year, reviving a tight transactional market.

Some economists are predicting four rate cuts from the RBA next year in the wake of movements from many of the developed world’s Central Banks. Investors would welcome a widened yield spread while increased borrowing capacity would encourage more tenants to make the leap to ownership.

The sub-$5m commercial market has shown resilience in

subdued transaction volumes.

Compared to other investment classes, commercial property yields remain attractive. Residential property yields often hover around 2% to 4%, and bonds and term

While equities may offer higher potential gains, they come with increased volatility, positioning commercial property as a stable alternative for long-term investors.

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Industrial: A Post-Pandemic Powerhouse The surge in e-commerce and heightened demand for logistics and warehousing facilities have tightened supply, with near-zero vacancy rates in some pockets.

Industrial rents in Sydney have soared with some markets recording increases of between 30-50% since 2020.

Limited land opportunities – and the cost of developing or replacing – has driven-up competition.

Private investors and syndicates increased their market activity in the industrial space over the last 12 months as institutional investors remained cautious amongst global challenges.

Secondary industrial yields are now in the order of 6-6.5% in Sydney’s south-west industrial corridor with the yield shift appearing to have stabilised.

LJ Hooker Commercial

Bilinga, QLD

Retail Markets in Tourist Areas Perform Well In tourism markets like the Gold Coast, retail rents in bluechip beachside markets were up 60-70% since pre-Covid.

LJ Hooker Commercial Southern Gold Coast recently sold % new tower development in Bilinga, opposite Coolangatta Airport.

After sitting idle for 12 months, LJ Hooker Commercial Southern Gold Coast was appointed to lease the properties, with tenants secured for two of three tenancies within a few months.

The three properties – totaling 230sqm - were then placed on the market for sale in one line, in line with the sellers’ long-term strategy, and sold for $1.36m.

Despite the rise of remote work, demand persists for ! $ In Adelaide, a former Bank of SA branch in Adelaide’s north-east has settled for $2.2m inclusive of GST following an Expression of Interest campaign managed by LJ Hooker Commercial Adelaide’s Claude Buccella and Mark Tettis.

The bank’s former Newton branch, sold as vacant possession, received 10 offers during the campaign, representing a competitive rate of $6,944sqm over the building and $2,475sqm across the site.

The freehold property boasted high visibility in Newton’s ! % " and car wash and the Newton Shopping Village, anchored

by Target and Drakes, to the rear.

“Location and exposure is critical for retail assets and the southern end of the Gold Coast is going through a period of renewal with new developments,” said LJ Hooker Commercial Southern Gold Coast’s Tara Imlach.

“There are still investors in the market and many are interested in acquiring assets now in anticipation of a future rate cycle driving up buyer competition.”

Claude Buccella

Mark Tettis

LJ Hooker Commercial Adelaide

LJ Hooker Commercial Adelaide

0419 394 110

0433 139 892

# % " on one side and a bustling neighbourhood shopping $ broad range of purchasers. With stamp duty exempt on commercial property purchases in South Australia, there was also enquiry from interstate investors.

“As an old bank branch, the property housed a customer $ high ceilings and it could have been repurposed for a lot of different business purposes including medical, creative and professional services.”

LJ Hooker Commercial

Tara Imlach LJ Hooker Commercial Southern Gold Coast 0452 418 343 5

CASE STUDY: LJ HOOKER COMMERCIAL MACARTHUR

Reshaping the Asset ManagerInvestor Relationship The adoption of video calls, digital signatures and other tech during Covid helped property managers and clients do business despite the global disruptions. While tech creates greater

enabler – not a substitute – for quality asset management service.

LJ Hooker Commercial Macarthur co-Director Aaron Ward highlighted a recent engagement the agency had with a client as an example of ‘old school’ service coming back to the fore.

“We conducted a portfolio review for a client where we blocked out four hours in our calendar and drove around with them to each of their properties we manage,” said Mr Ward.

“We discussed upcoming lease expiries and market rents, valuations, capex and maintenance, what their ultimate goal for each property was and more.

“That’s the sort of one-on-one service we were doing before Covid and there’s still a lot of value in dedicating face-time with clients to deep-dive into their strategy.

“For the rest of the year and into 2025, we’re going to be investing more time into traditional client interactions

manager, and our clients appreciate it as well.”

Penrith, NSW

Every investor should be looking for a commercial property manager who has: •

At least a couple of years’ experience in commercial property management

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An excellent grasp of market rates

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Insights into the in-demand and emerging requisites of tenants and how to value-add to the asset at lease and sale time

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Forward-planning experience so the maintenance schedule keeps the asset compliant and working at its optimum level

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In-depth understanding of the various

and industrial.

“One of the common things we see when a new client comes to us is that they’ve transitioned their tenant from gross to net terms without properly accounting for outgoings,” said Mr Ward.

“We’ve had to rectify issues where the investor has been tens of thousands of dollars out of pocket every year which, compounded over the term of a lease, is a major issue in their wealth strategy.”

If you’re thinking about optimising the performance of your asset for 2025 and beyond, reach out to your local LJ Hooker Commercial team today.

Relationships are critical to all LJ Hooker Commercial businesses, with many across Australia enjoying decades in business through the trust and loyalty they’ve built.

The LJ Hooker Commercial network has some of the industry’s most experienced asset management specialists.

LJ Hooker Commercial Macarthur has more than $1.5bn worth of properties under management. Existing clients routinely refer their peers to the business’ asset management team, which has been divided into sector specialisations of retail and commercial / industrial.

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Aaron Ward

Darren Zammit

LJ Hooker Commercial Macarthur

LJ Hooker Commercial Macarthur

0404 082 445

0404 083 445 LJ Hooker Commercial

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Connect with us ljhcommercial.com.au LJ Hooker Commercial does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections. LJ Hooker Commercial will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. © LJ Hooker Commercial 2024