Commercial Market

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As we enter reduced restriction levels as our stages of lockdown change, this is a positive sign for the economy that we are starting to resume business activities, albeit in a new way.
During this time, Ray White Commercial has been active in listing, selling and leasing commercial assets with many investors, developers and business owners keen to continue to plan for the future. 
The way which we do business may have changed but it has also resulted in the advancement of technologies which will be now more accepted such as online auctions, virtual tours etc. 
With record low interest rates and banks now more mobilized to complete transactions, we continue to see high levels of enquiries and buyers with finance ready with the ability to transact.
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Sales activity for this week remains at a similar level to last week recording over $114 million across 32 transactions. 
This week we have seen the average sale price of over $3.5 million well ahead of last week which featured a higher volume of smaller sales with an average of just $2.2 million. 
Close to $50 million of these sales were transacted in Queensland, spread across all asset classes with retail and development site activity greater than traditional industrial assets while medical related properties also sold. 
We have seen a number of medical facilities change hands this year and a growing number of enquiries in this sector may see it a more favourable investment option in a post COVID-19 economy.
NSW sales were limited but development site activity together with a number of smaller regional assets, while WA featured prominently this week with a number of industrial sales.
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Over the last six weeks, Ray White Commercial has recorded over $1.17 billion in Australian commercial transactions in the sub $50 million asset class. 
The reduced sentiment due to the current COVID-19 crisis not significantly dampening activity for private investor and developer purchasers while a number of institutional buyers have also transacted. 
Over this short period the spread of assets which have sold highlight the ongoing demand for a range of stock suggesting future confidence across all asset classes despite the current economic uncertainty. 
Industrial assets contribute a quarter of all sales while development sites increase their foothold representing 22.13 per cent of turnover. The office and retail asset classes which were anticipated to be adversely affected by the pandemic has accounted close to 38 per cent of all turnover demonstrating longer term confidence of this class. Encouragingly, uses such as hotels, aged care, child care and student housing have all seen robust investment activity.
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Commercial property transaction volumes sub $50 million: Ray White

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A growing population that is well supported by investment into new infrastructure projects has resulted in a pickup in commercial property development in Tweed, according to Ray White's latest Between the Lines report.
“This combined with record lows in interest rates has seen enquiry levels elevated by out of town buyers looking to capitalise on the sound fundamentals of the region and attractive investment yields,” said Ray White Head of Research Vanessa Rader.
“The Tweed region is an established commercial market that offers a mix of industrial product, retail both in showroom assets and strip retail, as well as office accommodation."
“This has historically been a very locally driven market with a high volume of sales transacting to local investors, developers and a growing number of small businesses looking for owner occupation.”
Ray White Commercial Sales and Leasing Specialists Darren Jones and Aaron Neylan said the Tweed region continued to excite.
“Tweed has a vibrant growing population and strong tourism trade all aiding in local business and investment into the Shire,” Mr Jones said.
“While traditional private investors have actively invested into the local economy, State investment into infrastructure has spurred on buyers from further afield looking to take advantage of competitive yields in this improving economy,” Mr Neylan said.
Mr Jones said across the Tweed region the industrial market continued to be the most active of them all.
“The high level of smaller industrial holdings including industrial units has dominated sales activity over the past 12 months, representing $41.453M during the 2018/2019 period, up 28.59 per cent on the prior financial year,” he said.
“These smaller assets with an average price of $943,000 are well suited to the smaller local investor keen to capitalise on low interest rates and yields averaging sub 6.75 per cent."
“Retail assets continue to regularly trade but smaller strip retail assets are becoming increasingly more difficult to keep occupied with food and service-related tenancies most active in the current market."
“Larger showroom retailing continues to be in hot demand with household retail trading continuing to be active, keeping yields within the 5.5 per cent to 7.5 per cent range.”
Mr Neylan said the industrial market was the greatest space-user across the Tweed region and the range of stock was wide with a mixture of older-style factory warehouses and smaller, modern industrial unit complexes which offered a mix of office and retail uses.
“Current net face rents for industrial stock average $125psqm, but they can range from as low as $70psqm up to $170psqm depending on its size, quality and access,” he said.
“Given the continued growth in this segment of the market, there has been limited scope for growth in the overall average, however new assets regularly push the upper rental limits."
“Properties which offer a greater office component or more traditional commercial office space have shown stable rents over the last 12 months, currently averaging $208psqm, but these can range closer to $300psqm for quality stock."
“The retail market has gone through a lot of change over the past few years, the change from more traditional retail uses, growth in vacancies in some locations and the growth in showroom stock has seen an average range of $259psqm.”
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Tweed commercial property market sees booming growth: Ray White

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GUEST OBSERVATION 
Here’s a glimpse at what’s happening—and why—in the Australian commercial real estate market from the measurement perspective of asking price for rents. There are many experts who give advice on how to understand the current trends in commercial real estate.
Whether you’re planning to buy, sell or lease, these expert opinions are worth noting.
Experts focus on “prime”
Most of the published information about commercial real estate relates to the highly visible “prime” end of the market. Sometimes this can give a distorted view of the whole market.
We, at <a href="https://www.commercialpropertyguide.com.au/" target="_blank">Commercial Property Guide</a> reveal the data associated with the less examined small and medium size market. The value of commercial real estate is closely tied to the rent a property can command. This is much more relevant for commercial than residential real estate. A study of what landlords are asking for commercial rents over time can give an insight into the likely future.
<img src="https://www.urban.com.au/images/2019/7/9/CPG%201.JPG" alt="">
National Market Overview 
The Australian market is made up of a relatively small number of significant markets. The three major markets are Melbourne, Sydney and Brisbane which account for the lion’s share of the national commercial real estate industry. These metropolitan markets respond and react to many local events.
There are, however, national and international themes that can be seen to have a bigger influence on how they perform. Rarely do the three big metropolitan markets act in unison. Commercial real estate has been experiencing a cycle that has lasted 3 years between lows.
The national asking rent increases peaked in early 2017 at very high levels and have been trending down ever since. Exceptionally glum periods were at the end of 2018 and the time prior to the national election when rent increases dropped below zero. Sydney has had a number of peaks and troughs in the past few years.
These cycles have been about 10 to 14 months from peak to peak. While Sydney commercial real estate rent increases sailed through previous national elections unfazed, this time was different. Sydney office rents have risen since the election.
Melbourne and Brisbane are not synchronised with Sydney. Melbourne rent increases were in a slow and graceful decline. However there has been an upswing in lease prices since the middle of 2018. While Brisbane rents have managed only increases of 1% every three months at best.
Office asking rent increases have been in what stockbrokers would call a “trading range” for many years starting in January 2017 with a slow declining cycle peak in each of the three successive cycles.
The explanation could be the rapid surge in coworking office space flooding the lower end of the small office market. You don’t need to be a behavioural economist to know office landlords are hoping for an end to decreasing rents.
At the more granular level there is variation in asking prices for office rents between major cities and even suburbs within the same city. For example, different office rent increases do exist between adjacent Prahran and Cremorne in Melbourne. Retail rents are a much more interesting picture.
The Retail market was going down for quite some time, but since July 2018, retail rents have been continuing to increase. By comparison, the industrial property market has been travelling well and has enjoyed reasonably stable rent growth over the last 5 years.
However, there was a mysterious bout of Christmas fear that started in October and didn’t show signs of improvement until this January. There was a fresh round of Amazon Armageddon about warehouse demand stories that spooked the industrial landlords and their real estate agents.
The fear seems to have evaporated as quickly as it arrived.
 Property Value based on Rent Return
Commercial real estate properties are valued on the basis of the revenue they can generate. The change in rent not only affects what the tenant pays, but also the value of the landlord’s asset.
The consensus of industry experts is that a “tight market” is driving future rent growth for Melbourne and Sydney - caused in part by leasing decisions being brought forward to beat other property seekers to the best available leases. More experts have identified the affordability of the Brisbane market driving its leasing demand.
These opinions are worth considering.
SIMON ROSE is the CEO of <a href="https://www.commercialpropertyguide.com.au/for-sale/" target="_blank">Commercial Property Guide</a> an independent commercial property website that focuses on news, views and tips about commercial property and the industry.
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Accurate commercial property measurements are worth 1000 surveys: Commercial Property Guide

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After dipping down in May, The Data App estimate trend cap rates rose to 6.66% in June; an increase of 13 basis points on last month. and 62 basis points higher than a year earlier, according to Rob Ellis, Director of The Data App (TDA).
Mr Ellis said, "this means cap rates, in trend terms, have risen to their highest level since June 2016.”
“From their low point in March 2018, <a href="https://thedataapp.com/" target="_blank">The Data App</a> calculate trend cap rates for commercial retail assets have now increased by 96 basis points.”
“While retail assets continue to be brought to the market, there is little doubt demand is becoming more subdued," he noted.
<img src="https://www.urban.com.au/images/2019/7/1/TDA%201.JPG" alt="">
Trend estimates for June show:
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<li>The value of shopping centre transactions was the lowest since April 2017 and;</li>
<li>The volume of gross lettable area (GLA) transacted during the month was the lowest since April 2012; over seven years ago.</li>
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TDA conservatively estimates around 1.3 million square metres of gross lettable area (GLA) is currently up for sale.
<img src="https://www.urban.com.au/images/2019/7/1/TDA%202.JPG" alt="">
Mr Ellis said, "current trend cap rates (6.66%) are still well below their long-run average (7.42%). Simple mean reversion would point to some further upside, while cyclically weak consumer demand, the impact of internet shopping as well as a number of AREITs being net sellers of shopping centres, would suggest scope for even higher cap rates.”
"Pulling in the opposite direction, commercial retail property is offering increasingly attractive yields, especially when compared to other asset classes. This value attraction will eventually encourage buyers back. For now, the balance of risks to shopping centre values remains skewed to the downside,” he concluded.
<img src="https://www.urban.com.au/images/2019/7/1/TDA%203.JPG" alt="">
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Commercial retail cap rates reach three year highs: The Data App 

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Dexus, Australia's biggest office landlord, has purchased 80 Collins precinct, a commercial and hotel development for $1.5 billion.
The 80 Collins precinct is a large-scale site located in the Eastern Core of Melbourne’s CBD.
The precinct comprises 105,000 square metres of Net Lettable Area across an existing 47 level A-grade office tower, a new 35 level premium office tower, a new retail podium with 21 tenancies and a new 255 room boutique hotel.
New components of the 80 Collins precinct are currently being developed, with completion slated for 2020.
Dexus chief executive Darren Steinberg said the sale was completed on a passing yield of about 5.3 per cent and will be accretive to the 2020 financial year results.
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"This is right on our strategy and will provide an excellent return to Dexus shareholders in the future," Mr Steinberg said.
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"We are playing to our strengths and we see strong demand in the Melbourne office market."
With this acquisition Dexus will own or manage circa 20% of the total office stock (by area) in the Eastern Core post the acquisition of the 80 Collins precinct and the development of the neighbouring Dexus owned 52 and 60 Collins Street.
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Dexus purchase 80 Collins precinct in Melbourne

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Asia Pacific commercial real estate investment markets appeared to run out of momentum in the third quarter of 2018 after two years of very strong growth, with deal volumes sliding in the region’s two largest markets, Real Capital Analytics (RCA) data showed. 
China registered the lowest quarterly level of transactions in five years as it reined in lending to investors and developers. Japan experienced its quietest three months since the Global Financial Crisis a decade ago.
Q3 2018 volumes were down 27% to US$27 billion compared to the same quarter last year, but were saved from a steeper decline by all-time high volumes in South Korea. 
The last time the region recorded a quarterly decline was Q2 2016. Over the 12-months ending Q3 2018, purchases of commercial buildings in APAC totalled US$165.0 billion, a 3% increase from the same period ending Q3 2017, RCA‘s Q3 2018Asia Pacific Capital Trends report showed.
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Petra Blazkova, RCA’s Senior Director of Analytics for Asia Pacific, said: “For the past decade the Asia Pacific real estate investment market has been characterised by rising prices and steady yield compression, enabling capital gains for most players."
"With property yields at historic lows and tighter financing conditions looming, or already encroaching in some markets, activity seems to be shifting into a lower gear as investors determine whether the next stage of the investment cycle is on the horizon.”
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Australian Price Growth Momentum Begins to Ebb<img src="blob:https://www.urban.com.au/ada82210-5607-45c4-a26f-ed2c41437e79" alt="page2image3763824" width="230.529000" height="0.719966">
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After a long run of gains, commercial real estate prices in Australia have logged two successive quarters of decelerating growth. Australian investment volumes over the quarter fell 39% compared to Q3 2017 and over 12-months dipped 1% year-over-year in Q3 2018 to US$26.7 billion (A$37.0 billion), RCA data showed. Deal count declined by 15%, based on 12-month rolling totals.
Offices, while remaining the best performer, started to plateau first, and particularly outside Sydney’scentral business district. The narrowing financing gap has also forced investors to take a pause. RCA’sCommercial Property Price Indices (CPPI) showed Australian commercial real estate prices have risen 82% in the past five years.
Sydney recorded growth in both the retail and industrial sectors for the first nine months of the year, however overall volumes declined by 5%, possibly signaling a market turning point. Average quarterly commercial real estate yields in the city, which move inversely to prices, rose for the first time in three years.
 Yields elsewhere have continued to compress over the past quarter, most notably in Melbourne by 25 basis points and where price rises in Q3 averaged the highest for any major city in the world, RCA data showed.
RCA’s Blazkova observed: “The jury is out on the Australian market following this bout of weakness. High prices are persuading owners to sell, which supports the investment market, but overall momentum appears to be slowing.”
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Melbourne bucks downward trend in Asia Pacific commercial property prices in late 2018: Real Capital Analytics

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GUEST OBSERVATION
It is clear to anyone that following significant rejuvenation, North Sydney CBD is still in a phase of substantial transition, led by the anticipated arrival of the Sydney Metro in 2024. The one thing the area needs to continue to evolve into a desirable, vibrant and well-functioning CBD is exceptional public space and more of it. Done well, these spaces will dramatically improve the vibrancy, safety, amenity, value and appeal of the CBD for all – from residents, visitors and students to workers and investors. 
Over the past six years, North Sydney Council has been working on strengthening the role of the North Sydney CBD as the principle economic engine of the North Shore. Following an audit by the Council of the public domain in 2015 and with funding from the NSW Government in 2018, Stage 1 of the North Sydney CBD Public Domain Strategy (PDS) ‘Place Book’ has been released. The PDS is specifically targeted at realising a more engaging and resilient CBD that offers a greater range of activities and unique public spaces for workers, residents and visitors alike. 
Over the next 20 years, the North Sydney CBD worker population is forecast to grow by more than 30% to over 80,000, with the residential population growing beyond 7,000. This growth will see more than 1,000,000 square metres of floor space by 2036. 
As the commercial and residential populations increase, so must the provision of additional public space.  
The ‘Place Book’ (Stage 1) is the initial ideas phase of the PDS and explores the future potential of public domain in the North Sydney CBD. It focuses on improving quantity, quality, connectivity and the interaction of cars, pedestrians, and cyclists of the public domain. More than 16,000 square metres of new public space has been proposed, in addition to upgrades to almost 21,000 square metres of existing public space. 
Major projects include:
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<li>Creating a new 6,500 square metre public plaza by pedestrianising the section of Miller Street between Pacific Hwy and Berry St that is directly outside the new Victoria Cross Metro Station. This will include a ‘scramble intersection’ allowing four-way crossing and the return of east-west (two-way) traffic on Berry Street between Pacific Highway and Miller Street;</li>
<li>Transforming Miller Street into a ‘Civic Spine’ through a suite of public domain upgrades between St Peters Park (south of Blue Street) and St Leonards Park (adjacent North Sydney Oval);</li>
<li>Creating a new 1,200 square metre Post Office Plaza, which will involve redesigning the intersection of Miller Street and Pacific Highway (removing small and dangerous refuge islands) and incorporating scramble crossing;</li>
<li>Converting the under-utilised deck of the tramway viaduct into a 3,500 square metre public space, similar to Sydney’s ‘Goods Line’ and New York City’s ‘Highline’; and</li>
<li>Upgrading Berry Street with 5,000 square metres of improved footpaths and squares, in addition to a new architecture offering incorporating shops and on street dining.</li>
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Council is also in the final stages of finalising its Ward St Precinct Masterplan, which will seek to create significant commercial floorspace in the precinct, as well as providing significant new public spaces.
Most of these projects are expected to be delivered in the next five years by 2024 to coincide with the opening of the Victoria Cross Metro Station. The tramway viaduct has a 10 year delivery plan. 
We expect the Council’s and proposed upgrades will instill confidence that the changes to North Sydney will continue to contribute the evolution strengthening of the CBD. 
We have seen the transformation of North Sydney translate through the commercial property market in a number of ways, including: 
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<li>Attracting new tenants into North Sydney from the Sydney CBD and surrounding suburban markets such as Chatswood and Macquarie Park. New commercial developments, including 100 Mount Street and 1 Denison Street, have signed tenants such as Nine Entertainment, who was originally based in Artarmon. </li>
<li>Increasing the amenity for existing tenants. North Sydney is already home to a number of global brands, such as Coca Cola, Vodafone, Sony and Genworth, that have, and will continue to, benefit directly from these improvements.</li>
<li>Enhancing capital values for existing land owners. Greater amenity and demand for office space has led to average prime gross face rents have increasing by 3.6% in the year to July 2018. This growth has translated into higher capital values for North Sydney landowners, with $1.26 billion ($10 million plus) of transactions occurring in the same period, according to Knight Frank Research.   </li>
<li>Institutions such as Charter Hall, Investa, Dexus, LGS and Mirvac are taking a real interest in the planning changes occurring in North Sydney and the impact this is having on their properties. </li>
<li>With North Sydney now considered an extension of Sydney CBD, a number of high net worth offshore buyers have purchased in the precinct. For example, the recent sale of 80 Mount Street attracted strong offshore interest due to its ideal location providing opportunities for the owner to integrate ground floor retail refurbishments into existing public spaces. </li>
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The proposed upgrades to the public domain in North Sydney CBD will stimulate future developments and attract new investment, vastly improving the streetscape and benefiting all those that utilise the space. 
Angus Klem is Partner, Head of North Sydney, at Knight Frank. He can be contacted <a href="https://www.knightfrank.com.au/contact/people/angus-klem-aun07179" target="_blank">here</a>.
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How North Sydney's planning changes will affect commercial real estate: Knight Frank

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Commercial property confidence is at much more encouraging levels than its residential counterpart, according to the latest ANZ Property Council Survey.
The survey found that the gap in confidence between commercial and residential property has now reached record levels.
Despite this, commercial sentiment has also dropped.
The drop in sentiment in the most recent quarter occurred across all segments, although the retail segment is still the weakest.
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Sluggish income growth, rising mortgage rates and utility costs and reduced wealth effects as house prices fall are all issues reducing the level of household consumption taking place.
Online retailing and global competition are also continuing to hinder domestic bricks and mortar retailers.
However, the industrial segment is now the most optimistic, displacing tourism.
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Firms in the industrial industry report that the construction pipeline has increased further over the recent quarter, especially in New South Wales, while it remains elevated in Victoria and Queensland.
Danial Gradwell and David Plank, the authors of the report stated:
"The outlook for capital values is solid, which we think is consistent with demand coming from the strong pipeline of infrastructure projects coming through in those states.
"In addition, while online retailing is disrupting the retail sector, the storage and logistics requirements are supporting the industrial sector."
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"It is disappointing to see that survey respondents’ appraisal of the federal government has retreated considerably," the report said.
"While the September quarter showed a solid improvement in the government performance index (likely in response to the 2018-19 Budget), the subsequent leadership spill in August appears to have hindered confidence once more."
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Commercial property confidence is solid, for now: ANZ

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The latest research from Burke Road Cityscope shows sales value has decreased in the quarter to August 2018.
In the latest quarter, there were six sales at a total value of $6 million, compared to the five sales at a total value of $10.8 million in the previous quarter.
This quarter brings the 12-month total to $85.8 million of 20 sales, an increase compared to the 28 sales at a total value of $58.5 million over the previous year.
The table below shows sales recorded for the past eight updates of Burke Road Cityscope.
<a href="https://www.propertyobserver.com.au/images/2018/9/10/BURKE%20RD%201.jpg" target="_blank">Click here </a>to enlarge:
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Notable sales in the August 2018 update of Burke Road Cityscope include:
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<li>5 Redfern Road, Hawthorn East (pictured below), a single-storey former house converted to use as an office and warehouse on a 190 square metre block and 7 Redfern Road, Hawthorn East, a single-storey former house on a 192 square metre block, which were bought together as a development site for $2.05 million through Knight Frank - Glen Waverley; </li>
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<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/9/10/5%20REDFERN%20RD.jpg" alt="">
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<li>742 Burke Road, Camberwell, a two-storey 48 square metre brick shop building with first floor dwelling with a brick outbuilding at the rear and parking for four or five cars in a paved rear yard and carport, which was bought for $1.65 million through Prowse Burns Commercial; and </li>
<li>Unit 1 at 321-323 Camberwell Road, Camberwell, a ground floor space on the north-west side of approximately 173 square metre and three car spaces, which was bought for $1.135 million through DBRE Pty Ltd - Moorabbin. </li>
</ul>
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Properties for sale in the August 2018 update of Burke Road Cityscope include:
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/9/10/267%20Camberwell%20Road.jpg" alt="">
<ul>
<li>267 Camberwell Road, Camberwell (pictured above), a single-storey brick retail building with brick one-car garage at rear, constructed in 1940 on a 257 square metre block, which is for sale by auction on 31 August, 2018 through Teska Carson Pty Ltd – Richmond; and</li>
</ul>
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<ul>
<li>Unit 1, a ground level retail space and unit 2, consisting of office space on level one and residential on level two at 694 Burke Road, Camberwell (pictured above), a brick building with three-storeys to the front and two and three-storeys to the rear, constructed 1890 and refurbished in 1997 and 2005 with a four-car garage at rear on a 184 square metre block; which is for sale together by auction on 31 August, 2018 through RT Edgar – Hawthorn.</li>
</ul>
Leasing opportunities listed in the August 2018 update of Burke Road Cityscope include:
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<li>693 Burke Road, Hawthorn East (pictured above), a four-storey commercial building with a ground floor car parking area and 24 basement car spaces, which has an office space of 336 sqm available through Gorman Commercial; </li>
</ul>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/9/10/691%20burke%20rd.jpg" alt="">
<ul>
<li>Chiquita House at 691 Burke Road, Hawthorn East, a five-storey concrete building with parking for 17 cars on part of the ground floor and to the rear, built 1971  and building was renovated in 1990 and again in 1999, which has office space ranging from 214 to 329 square metre available through Gorman Commercial; and</li>
</ul>
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<ul>
<li>697 Burke Road, Camberwell, a seven-level concrete office building built in the 1970s and refurbished in 1999 which comprises office floors, an upper ground floor showroom/office and parking for 38 vehicles on the lower ground floor and an additional car space stacker for 16 vehicles, has an office space of 253 square metres for lease through JLL Glen Waverley and Colliers International Melbourne East. </li>
</ul>
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Burke Road, Camberwell commercial property sale values fall

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Commercial property prices have skyrocketed in recent years, sowing seeds that could lead to opportunistic buying opportunities – and distressed sales – in coming years.
Here are 10 factors at play that could lead to attractive buying opportunities for those who have cash at the ready.
1.    There’s a limit to how low yields can go. As property prices in some markets have risen faster than rents, the rate of return has reduced and reduced. No one knows just how low they can go, but there is a floor and we’re getting close to it.
2.    Australia’s big four banks have become increasingly cautious in their lending in this space. They have, perhaps, heeded <a id="m_-6975728259029557408LPlnk750883" class="m_-6975728259029557408OWAAutoLink" href="https://www.rba.gov.au/speeches/2017/sp-so-2017-11-20" target="_blank" data-saferedirecturl="https://www.google.com/url?hl=en&amp;q=https://www.rba.gov.au/speeches/2017/sp-so-2017-11-20.html&amp;source=gmail&amp;ust=1528424268072000&amp;usg=AFQjCNElBd8bcSWPwe0ZyXyFIOLx0GY3-Q">warnings</a> by RBA’s head of Financial Stability Jonathan Kearns, of the risks of a “sharp correction” and potential for a repeat of the 1990s bust that followed the 1980s boom.  
3.    Changes in market conditions and a potential reduction in debt availability and/or increase in costs is likely to require some developers who acquired assets for future conversion or demolition to sell.
4.    Foreign banks are still lending for Australian commercial property but could experience pull back if interest rates rise or there is a change in global capital markets.
5.    Unlike residential loans, commercial property loans need to be refinanced every few years. Currently, rising property prices have provided a cushion for heavily indebted owners to help meet their obligations to banks. If this levels off or falls, it could be problematic for those owners.
6.    Interest rates could rise. Historically low interest rates have also underpinned commercial property affordability and supported high prices, and a rise could render some owners into financial trouble, forcing sales.
7.    Rising bond rates. If interest rates rise, then bonds will start to offer higher returns – meaning investors, particularly those overseas who are likely to see rates rise first, could place cash elsewhere.
8.    Businesses may be doing better than they were in the midst of the GFC but they are still price-sensitive and unlikely to swallow much more in the way of increased rents, which have been rising in most locations, albeit not as fast as property values.
9.    High-end corporate office occupants are increasingly seeking better amenities – end-of-trip facilities, ground floor cafes and gyms, even <a id="m_-6975728259029557408LPlnk484422" class="m_-6975728259029557408OWAAutoLink" href="https://www.smh.com.au/business/companies/concierge-services-in-office-blocks-a-musthave-for-prospective-tenants-20160707-gq0xfz" target="_blank" data-saferedirecturl="https://www.google.com/url?hl=en&amp;q=https://www.smh.com.au/business/companies/concierge-services-in-office-blocks-a-musthave-for-prospective-tenants-20160707-gq0xfz.html&amp;source=gmail&amp;ust=1528424268072000&amp;usg=AFQjCNHJYyVJ3j6j7Jp6zUkcnxwszALaQQ">concierges</a> – as well as strong environmental credentials. Cash-strapped landlords who lose a major tenant may not be able to afford the upgrades required to attract new tenants.
10.  Federal Government tenants require properties to have a minimum 4.5 star NABERS rating, however achieving this in an existing property requires significant investment which, again, the cash-strapped landlord might not be able to fund easily.
Russell Bullen is the chief operating officer of diversified property company Quintessential Equity
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