The Commonwealth Bank of Australia (CBA) conduct and publish one of the most comprehensive market analyses going around, and February’s Commercial Property Market Update has made a few interesting points.
Let’s take a closer look.
Point of interest: Melbourne’s economic forecast
A rebounding economy are three words we love to hear, and Victoria is forecasting a GSP of 3.3 that will reflect all fundamentals of commercial property like growing occupancy, reducing vacancy, and inevitably rising rents. This figure is a significant forecast for our state and is (not so coincidentally) in line with what we have been seeing this side of the calendar year across all points of commercial real estate.
Despite the 10-year bond rate rising, commercial property yields continue to sharpen with demand outstripping supply. Although the CBA have noted that the increasing cost of funding will reduce return on investments, we’re approaching this differently. We’ve observed that occupancy is high and where there has previously been a lull in retail and office leasing, we’ll now likely see a steady rise in this area and across all sectors the market — countering the anticipated interest rate rises and strengthening yields.
The flux in population figures is no surprise here. Public health orders encouraged Melburnians to flee into neighbouring states to weather the Covid storm, clearly reflected in these figures with some 42,000 residents having fled our state. Melbourne has experienced mass exits before, but we have no doubt that after the storm has settled, we will see a rebound of numbers with the return of a new normal — increasing the need for physical workplaces, ample development, and infrastructure upgrades. But if there’s one thing we know for sure as Patriotic Melbournians; our residents, economy, and industries will bounce back in spectacular fashion.