Page 9 - Wealth Adviser Newsletter March 2025

ISSUE 107
MARCH 2025

Premium Commercial Properties on the Rise Institutional Investors and Corporations
A report by CBRE forecasts a surge in premium com- Larger organisations typically focus on:
mercial property demand in 2025, particularly in high-end • Portfolio Diversification: Balancing risk with other asset
office and industrial spaces (“Premium Commercial Property classes such as equities and bonds.
Set to Surge in 2025”). Factors contributing to this trend • Sustainability and ESG Factors: Environmental consider-
include: ations are increasingly influencing corporate real estate
• A return to office work, albeit in hybrid formats. strategies.
• Institutional investors shifting back into the commercial • Long-Term Lease Agreements: Stability in rental income
real estate space. remains a priority.
• Australia’s continued population growth driving demand
for logistics and retail properties. By understanding these distinctions, investors can tailor
their approach based on their financial objectives and risk
Sector-Specific Insights tolerance.
Different sectors within commercial property are experi-
encing varied levels of growth: 4. The Role of Demand and Vacancy Rates in
• Industrial and logistics: Strongest growth due to in- Investment Decisions
creased e-commerce activity. Steady Demand and Shifting Work Habits
• Office spaces: Stabilising vacancy rates, but quality and The hybrid work model has transformed office space re-
location remain key. quirements. While demand for traditional office spaces has
• Retail: Selective resurgence in premium shopping pre- softened, well-located premium offices continue to attract
cincts. tenants. The Property Council reports that vacancy rates
have remained stable in key markets, a sign that the worst of
For clients exploring investment options, it is essential to the downturn may be over.
assess the long-term viability of different asset classes and
align them with their financial objectives and risk tolerance. Implications of Vacancy Rates
Vacancy rates are a key indicator for investors. High
3. Investment Strategies for Different Types of vacancy rates can signal risk, while low or stabilising rates
Investors indicate market confidence. According to the Property
Not all commercial property investors have the same Council:
objectives. Business owners, individual investors, and • Sydney and Melbourne CBDs are showing signs of recov-
institutional entities approach the market with different ery.
priorities. • Brisbane and Perth continue to experience growth due to
economic expansion.
Small Business Owners • Secondary office spaces still face leasing challenges.
For small business owners looking to purchase office or
retail space, the following factors are crucial: Practical Strategies for Investors
• Location: Proximity to clients and accessibility for em- • Assess location and tenant stability: Premium locations
ployees. with long-term lease agreements offer lower risk.
• Lease vs. Buy Analysis: Weighing long-term savings • Evaluate the market cycle: Understanding whether an
against upfront capital requirements. asset is priced near its long-term value is essential.
• Zoning Laws and Future Development Plans: Ensuring • Guide clients on lease structures: Long-term, infla-
the investment aligns with business expansion goals. tion-adjusted leases provide a hedge against market
fluctuations.
High-Net-Worth Individuals and Private Investors
Those investing in commercial property for wealth-build- 5. Alternative Ways to Gain Exposure to
ing purposes should focus on: Commercial Property
• Capital Growth Potential: Identifying high-growth areas For those who do not want direct property ownership,
with strong rental yields. several alternative investment options exist:
• Tenant Stability: Properties with long-term, high-quality
tenants reduce investment risk. Real Estate Investment Trusts (REITs)
• Diversification: Spreading investments across different • REITs offer exposure to commercial property without the
sectors to mitigate volatility. complexities of direct ownership.

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