The Australian property market has been facing some challenges lately, with rising interest rates, a downturn in the residential market, and subpar yields in many cities. This has made it more difficult for investors to find good commercial deals, as the supply of properties with strong returns has dwindled due to high demand. However, there are still opportunities to be found, especially in regional townships where new commercial businesses are popping up to support growing populations. These businesses often have more cash coming in than going out, making them a sustainable long-term growth opportunity for investors.
In my book Cashed Up With Commercial Property, I delve into the yields and returns available in some of these regional areas. For example, Albury has a 12.75% return on investment, with a potential positive cashflow of over $30,000 per year from a million dollar investment. Investors are on the lookout for the best opportunities, and I have some recommendations for the best places to find a commercial deal in Australia in 2023:
New South Wales:
- Wagga Wagga: 6.5-7%
- Albury: 6-6.5%
- Maitland: 7%
- Muswellbrook: 8%
Queensland:
- Inland Sunshine Coast: 6-6.5%
- Bundaberg: 7-7.5%
- Gympie: 7-7.5%
Victoria:
- Warrnambool: 7-8%
- Geelong: 5% plus
- Wadonga: 7% plus
As for the types of properties to consider, retail shops in gentrifying areas can provide growth in a few years and enough cashflow for the meantime. A yield of around 7% can be expected in a regional area. In Melbourne’s CBD, office space may seem like a risky choice given the current reports on CBD yields and lack of office capacity, but it could actually be a great opportunity for investors. With investor confidence still low in Melbourne, now is a good time to snag a 6% yielding property that will provide both stability and growth in the long run. Industrial properties are also in high demand, though it can be hard to find anything close to 6%. However, going for a large regional or fringe metro area might yield (pun intended) a 6.5% return.
While the Australian property market has been facing some challenges lately, it’s important to note that commercial real estate can still be a viable investment option. In fact, the demand for commercial property, especially those valued at under $1 million, has been overwhelming due to the limited supply. This high demand can actually present opportunities for investors, as it drives up property values and can lead to strong returns.
One key factor to consider when looking for commercial investment opportunities is location. As mentioned in the article, regional townships with growing populations and new commercial businesses can be a good bet, as these businesses often generate more cash flow than they spend, creating a sustainable growth opportunity for investors. Additionally, these areas may offer higher yields due to the positive cash flow, so it’s worth considering properties in these locations.
Another factor to consider is the type of property. Retail shops in gentrifying areas, office space in the CBD (despite the current challenges), and industrial properties in fringe suburbs are all mentioned as potential investment options. Each of these property types has its own benefits and risks, so it’s important for investors to do their due diligence and carefully evaluate the potential returns and stability of each option.
It’s also crucial for investors to educate themselves and do their own research, rather than simply following trends. The commercial property market is constantly changing, and what may have been a good investment in the past may not necessarily be the case now. By staying informed and making informed decisions, investors can increase their chances of success in the commercial property market.