2023 Commercial Market Wrap

Northern Beaches Market Update

Navigating the Commercial landscape.

Upstate Commercial are at the forefront of the Northern Beaches commercial property market. Led by Vincent West our outstanding Commercial team has navigated through a challenging property market to achieve substantial success in 2023 and increased their market share to over 50%.

As we reflect on a year of notable achievements, we thought we’d share our insights on the year that was and also forecast future trends into 2024 for those who are interested in the intricacies of the local commercial real estate landscape. Join us as we unpack the factors shaping the future of the Commercial Real Estate market on the Northern Beaches.

What we’ve observed in 2023.

A tumultuous market We experienced a tumultuous commercial property market in 2023 with varying real estate conditions. This uncertainty is largely due to the 13 interest-rate rises since May 2022, rising inflation, and an underlying sentiment of economic uncertainty. Despite the inconsistency, Upstate has continued to see record commercial property vacancy rates and all-time rent rises in a number of commercial sectors.

Increased time on the market Across Australia, commercial property enquiries were down 18% in 2023. With subdued demand, this means properties are spending a longer time on the market on average than during the pre-pandemic booms. Despite this, we’ve noticed well-priced, professionally marketed commercial properties continue to outperform.

Growing commercial interest from the big end of town We’ve noticed large institutional investors and organisations are increasingly interested in commercial real estate investments. Often fed up with short-term, high-maintenance tenants in the residential sector, many institutional groups are shifting their focus to commercial properties that offer long-term, stable tenants and incomes in case of subdued economic growth in 2024 and beyond.

Reasons to sell in the current market After over a year of post-pandemic adjustment, the Australian commercial real estate market has experienced the lowest level for a third quarter seen in more than a decade.

Fortunately, The Beaches are witnessing a much different story showing signs of great improvement despite ongoing economic headwinds. The recent up-tick is a sign that the region’s resilience during a tumultuous few years is beginning to bear fruit, as reflected by a relatively strong economy since the initial slumps around COVID-19.

Upstate Commercial stats 2023.

43

84

$18,000,000

Commercial sales

Commercial leased

Highest sale price

$172,000

50%

200,000+

Highest lease price

Market share

Prospective buyers on our database

4,390

636

478,698

Number of enquiries

Number of inspections

Visitors to our website

6,649

7,700

500+

Instagram following

Facebook following

Managed properties

Commercial Sectors Update.

Warehouses The Northern Beaches’ warehouse market is still the most desired and strongest commercial asset class. Although yields remain fairly tight, the industrial sector still boasts the most demand with the lowest vacancy rates of all sectors and the lowest incoming supply. In recent months, we’ve found that both rents and sale prices are stabilising and that quality buildings with easy access and higher clearance, in good locations are still outperforming the secondary stock by far.

Offices On the beaches, we’ve noticed ‘a flight to quality’ - meaning tenants and buyers are desperate for the highest quality of office space with warm shell fit-outs.

This means the presentation of your office space is key to strong enquiry levels, as employers look to entice their staff back into the workplace with appealing spaces. This trend is largely attributable to the success of our more boutique suburban office markets, in particular Dee Why and Manly, which boasted the lowest vacancy rates on record.

Retail It has been a volatile year for the Australian retail industry sector with consumer discretionary spending reducing due to higher interest rates and a rising cost of living. Fortunately, the Northern Beaches holds a strong position due to its demographic and tourism trends and so, despite a slight softening in yields, we’ve seen investors still have an appetite for blue chip tenanted assets.

On the tenant’s side, we’ve seen they are looking for more turn-key properties to reduce their initial fit-out costs leading many landlords to hold out for quality tenants in search of a longer lease period. With retail sales continuing to tighten, it will be interesting to see how the retail sector responds in 2024.

Showrooms With commercial vacancy rates being at all-time lows on the Northern Beaches, A-grade tenants in these properties are thriving but there remains a lot of demand backlogged for well-located showroom opportunities. While Gyms and Health Facilities were the flavour of the last few years for this asset type, we are now seeing furniture goods, trade supply and bulky goods retail options push Gyms to the industrial sector.

Developments Over the last financial year, we have seen a lot more commercial stock coming onto the market right across the Northern Beaches primarily due to the increase in recent construction costs. The rapid rise in prices is making it difficult to price certain large projects however, the more experienced developers are actively seeking opportunities in more premium locations. With a short supply of affordable housing on the beaches, many developers (local and out of area) continue to demand development in the region.

Upstate as market leaders.

In a market defined by its complexities, Upstate continues to set the bar high with an impressive 50% market share on the beaches. Here are some results we witnessed in 2023 that showcase our unwavering commitment to commercial property excellence.

PROPERTIES SOLD

PROPERTIES LEASED

UPSTATE

Other 23.9%

UPSTATE Agency 4

Other 38.8%

23.3%

50.4%

5.1%

17.1%

10.3% Agency 3

10%

10.3% Agency 2

Source: Realestate.com.au FY22/23

Agency 4

Agency 2 10.8%

Agency 3

The year ahead - our predictions for 2024.

A shift to recession-proof assets: The Australian government has forecasted economic growth for the 2023-24 financial year to just 1.5% and has predicted inflation to hit 7.75% by year-end. With growing uncertainty, we predict commercial owners to act quickly when selling as they shift to recession-proof assets and cash. Despite this increase in stock coming into the market, we expect strategically located commercial buildings to continue to perform.

Predict rental pricing to hold strong on The Beaches : The Northern Beaches market still has a relatively finite supply of commercial properties. As such, we forecast property price growth to remain relatively strong and perhaps even outpace the national average rate of 6.5% per annum over the next 5 years. With a dampened economy ahead, now is the perfect time to buy in the relatively stable Beaches market.

Investors buy in anticipation of the Brookvale Masterplan : Initially drafted in 2017, the recently revised Brookvale masterplan is set to improve transport connectivity, increase community spaces and support around 1000 new jobs with new quality office spaces in the area. As they have already begun doing so, we predict that many investors will look to buy commercial real estate on The Beaches in anticipation of these major developments.

What we’ve achieved in 2023.

205

Total commercial sales on the Northern Beaches for 2023

48 Winbourne Road, Brookvale

12 Boyle Street, Balgowlah

27 Orchard Road, Brookvale

19A Wesley Street, Elanora Heights

11 Boola Place, Cromer

61-63 Kenneth Road, Balgowlah

685 Pittwater Road, Dee Why

1/1 Minna Close, Belrose

26/32-34 Campbell Ave, Cromer

Lot B Lady Game Drive, Lindfield

92 Garden Street, Nth Narrabeen

613-615 Pittwater Road, Dee Why

We’re proud to be the largest commercial property team on the Northern Beaches.

And the only commercial agency that services every corner of the region - from Manly to Palm Beach and everywhere in between, we’re constantly adapting our technologies and approach to the changing market to support our client’s success.

Having fostered results for our clients for over 40 years, we’re an experienced team with a finger on the commercial pulse and a true love and understanding of the Beaches.

Achieving the best outcome for you is always our motivation.

So, for all of your commercial property and leasing needs, contact Upstate.

Speak to the No 1. Team to Lease, Sell and Manage.

Call us today to discuss the potential of your property on 02 9971 9000.

upstate.com.au