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Industrial property to outperform in 2022

Industrial property will continue to be a standout performer in the commercial sector while CBD office and retail will potentially struggle in 2022.

That’s the belief of valuer, Nick Barlow from Suburbanite, who predicts another strong year ahead for commercial property.

According to Mr Barlow, the commercial property market and the industrial sector, in particular, will continue to be a good choice for investors.

“Industrial will continue to be the standout performer in the commercial sector well into 2022,” Mr Barlow said.

“Industrial property might not be as exciting as many people view it as a warehouse in the back of an industrial area, but it’s actually proven itself to be a really solid investment and sought after product.

“What’s really benefited industrial property has been the lack of impact from lockdowns as most businesses have been able to continue to operate.

“We have also seen the huge uptick in building and home renovations, and many businesses have needed additional storage as well as other business who provide products through places like Amazon. That’s really seen the flow-on effect.”

Mr Barlow said the nature of industrial property will continue to evolve with demand being so high.

“What’s also happened has been that new industrial estates are now being developed to include an office component or even a cafe and they are now mixed-use developments,” he said.

“We’re seeing estates that were traditionally Monday to Friday, but now with the inclusion of things like microbrewers and artisan bakeries, these are now becoming real business hubs that operate seven days a week.”

Mr Barlow said that while industrial property will continue to increase in value, growth rates could taper.

“We just witnessed a year of huge pressure for industrial land availability, which increased growth and put further downward pressure on yields,” he said.

“However, these growth rates will slow due to increased stock levels, already tight yields and the prospect of interest rate rises.”

Given the changes the world has lived through in the past 12 months, Mr Barlow believes that essential services will continue to be a target for investors in 2022.

“Essential services tenants such as medical, food and beverage, fuel and childcare have also been standouts and this trend is expected to continue for at least the next couple of years,” he said.

“Yields have continued to compress as landlords seek security and a return that is still better than the banks can provide.”

After a difficult few years, Mr Barlow believes CBD office and retail will continue to struggle in the next 12 months.

Tourist towns could also see a slowdown from the record influx of people they’ve been seeing. 

“Areas that will struggle will be areas with poor infrastructure, low government spend and high vacancy rates,” Mr Barlow said.

“Small regional areas that enjoyed an influx of local travellers during COVID will see visitors returning to normalised levels throughout the year which will impact these markets accordingly.

“Serviced apartments and AirBnb will also struggle throughout 2022 as they begin to feel the pinch of last year’s downtime and last-minute cancellations.”

Mr Barlow sees a slowdown from the unprecedented demand and growth that have been a feature of the past 12 months.

“Generally, in steadying conditions the better located properties will continue to be sought after and those in secondary locations, which have done well during favourable conditions, are usually the first ones to feel the effects when some of the heat comes out of the market,” he said.

Mr Barlow’s expects Brisbane to outperform both Sydney and Melbourne thanks to continued interstate migration.

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.