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Newcastle commercial markets surge on back of share market volatility and DIY super fund demand

Owner-occupiers and investors are combining to drive demand for commercial property in Newcastle priced below $2 million, according to Steven Dick, Co-Principal of Raine & Horne Commercial Newcastle.

โ€œThe current rules[i] let Self-Managed Super Funds (SMSFs) purchase a business premises, allowing owners to pay rent directly to their SMSF at the market rate,โ€ said Mr Dick.

โ€œSavvy Newcastle business owners are taking advantage of this ruling, along with historic low interest rates, to drive up demand for office, retail and industrial space.

At the same time, smaller retail spaces are leasing well as microbusinesses take their first growth steps.

โ€œOffice and retail vacancy rates in the smaller size ranges have shrunken dramatically in Newcastle, which is a very strong sign that weโ€™re operating in a healthy market,โ€ said Mr Dick.

Investors are proving to be a strong buying bloc in the Newcastle commercial marketplace.

โ€œInvestor demand is unprecedented, with tenanted properties being snapped up almost as soon as they hit the market,โ€ said Mr Dick.

โ€œAround 50% of properties up to $2 million are selling to investors prior to auction. Under the hammer sales are proving to be the best way to sell Newcastle commercial assets.โ€

More investors are rebalancing their portfolios away from shares and fixed interest, according to Mr Dick.

โ€œMany investors have recovered their positions over the last 8 years since the GFC, and they want to protect this position by diversifying. As a result, they are hedging their bets by investing some of their hard won capital into Newcastleโ€™s commercial real estate markets,โ€ he said.

Investors and business owners are also recognising the long-term opportunities that will be delivered by massive mixed use developments such as the University of Newcastleโ€™s $95 million education precinct, NeW Space, in the heart of the Newcastle CBD[ii].

โ€œNeW Space will bring thousands of law and business students to Newcastle and it will re-energise the city centre,โ€ said Mr Dick.

โ€œThere is also the Doma Building[iii] in the Honeysuckle precinct, which is a $36 million commercial, residential and retail complex, which is in the early stages of construction. This development will be a major plus for Newcastle when itโ€™s completed in 2017 along with the University.

โ€œThere are 3 or 4 other major developments in the pipeline that will create more commercial space and feed into the student accommodation market, as well as provide options for first home buyers and downsizers who are moving in increasing numbers to the CBD.โ€

Industrial assets are also enjoying a period of strong demand, with owner occupiers leveraging low interest rates and self-managed super funds acquiring places of business.

โ€œThere have been a couple of larger industrial enquiries from interstate companies looking for alternative marketplaces to ply their wares,โ€ said Mr Dick.

โ€œBig industrial is starting to return to Newcastle but itโ€™s a slow take up.โ€

For all your commercial sales, leasing and property management needs in the Hunter region, contact Raine & Horne Newcastle on 02 4915 3000.

[i] http://law.ato.gov.au/atolaw/view.htm?locid=’SFR/SMSFR20091/NAT/ATO’&PiT=99991231235958

[ii]https://www.newcastle.edu.au/about-uon/our-environments/new-space

[iii]http://domagroup.com.au/property/18-honeysuckle-drive/

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