Commercial and Industrial Property Update November 2022
almost 2 years ago
Commercial and Industrial Property Update November 2022

The Bendigo commercial property market has attracted significant interest and shown strong growth, particularly in the last 12-18 months. Demand for commercial and industrial investment and development opportunities has been very strong. We have seen public investment in our region at an all-time high, with the Bendigo Hospital, Gov Hub and Law Courts all demonstrating confidence in the fundamentals of the local economy. This investment combined with an added focus on regional working and living during COVID has driven significant interest and demand for property by local and ‘out of town’ investors and developers.

Commercial Sale
Yields have certainly softened, but the appetite and demand for quality assets remain strong. Locally we’re confident that with the amount of money the government has spent, that private money will follow. We have seen strategic acquisition of sites by out of town investors and developers who see excellent value and opportunity in our region. Interestingly, we know of a number of large ‘big box’ retailers looking for prominent sites, while there are a number of inner-city commercial and residential developments in the planning phase.

Commercial Leasing
Enquiry and appetite remains good for quality space, particularly smaller spaces which continue to see demand, while larger spaces are taking some time to lease. Despite the outlook during COVID, quality office space with parking remains in demand. Leasing rates per square meter vary, but we’ve experienced results from $200 - $320psm. An example of recent demand has been offices at 62B Breen Street and 56 Queen Street, multiple parties were interested and resulted in a bidding war

Industrial Sale
Industrial sales still remain the strongest part of the market. Yields have softened but there is still a dislocation between supply and demand. There may be a moderate softening of land prices as investors aren’t able to make the return stack up with the increasing build costs. An office/warehouse in Contempo Court, East Bendigo recently sold to an owner-occupier who had been in the market for some time, and a strong price was supported by a lack of supply.
Industrial Leasing
The enquiry appetite for industrial spaces between 200-400m2 continues to be the strongest area of the market at present. Average leasing rates per square meter range between $100m2 - $120m2 for new or good quality space. The Matchett Estate in East Bendigo which includes 10 newly constructed tilts slab/colorbond warehouses of approx 160m2, have all been leased at strong rates prior to the completion of construction

Industrial Leasing

 

Residential Development
We have had some really strong results in this space over the last 12 months. Residentially zoned infill sites across various suburbs have been sought after, A 8-acre site in Kangaroo Flat was sold in April and settled last week, with a regional developer (out of Bendigo) already well through planning. As the interest rate rises gathered momentum mid-year, it has taken a little of the sting out of this market, with enquiries and competition on some more recent sites softening.

Challenges
Construction costs
Q3 2022 showed national residential construction costs increased at a record rate in the year to September 2022, the highest annual growth rate, excluding the period impacted by the introduction of the GST. This is having a flow on effect to local developments, forward building contracts and land sales. 
Interest Rates
There is a broad consensus that the cash rate will stabilise around mid-2023. Despite this, borrowing remains very cheap from a historical point of view, and we see this mainly having effects on sentiment with a normalised level of activity that will return by mid-2023.
Opportunities
Regional investment appetite
We see out-of-town investment continuing on the back of recent and planned government spending. We see the spotlight in our region continuing until the 2026 Commonwealth Games.
Tenant appetite and investment return
Businesses which are trading well continue to look for expanded space and exposure. We see leasing activity to remain strong. There is potential for increased rents for properties coming off leasing periods, with market reviews and CPI increases providing the potential for return on investment uplift
If you would like to discuss anything in relation to Commercial or Industrial Property, please reach out to Jeremy Brown on 0417 590 171