The commercial property market in Western Australia has risen from the ashes in the last financial year, according to Ray White.
Ray White head of research Vanessa Rader, in conjunction with Ray White Commercial WA directors Stephen Harrison and Chris Matthews, saw signs of positivity in the latest Between the Lines: WA Investment Activity 2020/21 Financial Year Review.
“The quest for private buyers to diversify and invest in higher yielding investments has seen a swift growth in demand, from both local and interstate investors,” Mr Harrison said.
As WA emerged from the grips of the pandemic, the Ray White Commercial team witnessed growing demand for stock, and lower yields which aided in gradually encouraging vendors to come to market.
The notable asset classes were office and industrial, both experiencing a resurgence of interest.
“During the financial year we have recorded $1.029 billion in transactions across office assets. While this is down 46.02 per cent on the year prior due to a number of large institutional sales last year, it remains in line with the historic average,” Ms Rader said.
Mr Harrison said there is continued interest in the office market from foreign buyer groups, while local syndicates and investors have also actively pursued these assets, regardless of the pandemic.
“As staff rapidly return to work, vibrancy has returned to our centres and sentiment across the office market has improved,” he said.
“We have also seen many private investors and owner occupiers making their first foray into commercial property, with a high volume of sub $1 million office suites across the CBD and suburbs.”
Ray White has found industrial assets have been the standout performer nationally during the pandemic, and it has been no exception for Western Australia.
Over the financial year, WA has recorded $1.148 billion in industrial sales transactions, 1.3 per cent up on the previous year.
“The growth in interest by small businesses and local and interstate private investors, has driven up capital values in some regions, while new lows in yields have been recorded,” Mr Matthews said.
“Low interest rates have fuelled much of this investment, while the growing residential prices in Perth have seen many investors switch to industrial as an alternative,” he said.
Retail assets were the worst affected commercial type during the pandemic. Forced lockdowns and restrictions on trade saw many retailers fold during 2020, leaving large vacancies in both retail centres and local main streets.
While 2021 is seeing an emergence of new businesses starting to fill these spaces, the rental prices has seen an noticeable adjustment. Clothing and soft goods retailers have made way for more food, services and experienced-based retailing.
Supermarket anchored centres continued to be in strong demand by investors, with others repositioning their assets to attract medical and childcare service tenants.
Of course, the tourism industry was also greatly affected in the last financial year. Only $64.7 million in hotel assets has changed hands, including pubs. Ray White expects to see a rebound in activity levels in coming years.
Ray White concluded that WA will continue to be the driving force behind the positive national economic story.
The increased interest from interstate buyers, local investors and offshore groups who are looking to capitalise on this positive momentum, is set to continue into the new financial year.