Commercial buyer behaviour changes in response to shifting market

Commercial property sales volumes were 37.6% lower in 2022-23 than the previous financial year, according to data from Ray White, Real Capital Analytics and PIMS.

Ray White Commercial Head of Research Vanessa Rader said those changed market conditions led to a change in buyer behaviour.

Despite the uncertainty surrounding the future of work, the office regained its status as the leading commercial asset class. 27.7% of all sales in 2022-23 were office properties, up from 25.0% in 2021-22.

“Working from home has seen a strong reduction in occupancy levels, and vacancy rates continue to show upward momentum in most markets, notably CBDs,” Ms Rader said.

“Private buyers have looked towards suburban offerings, which have been showing improving occupancy results, while offshore buyers and institutional players have had a quiet year in this space.”

Industrial slipped from the number one asset class in 2021-22 (with 27.7% share) to number two in 2022-23 (with 23.5%), but remained a strong performer.

“This market continues to see some of the best-returning assets at the moment given the mismatch in demand and supply,” Ms Rader said.

“Occupier demand has remained strong, notably for larger distribution/logistic users, however limited new supply and land constraints have kept vacancies limited and rental growth positive. 

“Despite the growing cost of finance, demand for these properties continues to grow, however with yield movement upward, owners are slow to bring assets to market.”

Retail up, alternative down

Retail suffered a sharp decline between 2021-22 and 2022-23, falling from 22.6% market share to 17.1%.

“These results were heavily influenced by a number of larger regional transactions occurring last year. We have, however, seen continued demand over the last 12 months for smaller neighbourhood or convenience-based retailing from a range of buyers, while investment into strips has slowed,” Ms Rader said.

“Development site activity has grown this last year, after a number of quiet years due to lockdowns, disruption to building sites and the excessive increases in construction costs, resulting in investment into developments of all types falling.”

Conversely, the alternative property sector enjoyed strong growth between 2021-22 and 2022-23, increasing its market share from 6.8% to 12.8%.

“While volumes peaked for assets such as service stations in 2020, continued demand by a range of buyers across a variety of uses has grown,” Ms Rader said.

“Childcare continues to break new ground given the fundamentals of population growth and government subsidies aiding in keeping occupancy elevated. 

“Also rising in popularity has been the healthcare/medical space, which has seen offerings change from medical suites and centres, through to private hospitals and integrated facilities providing a 'one-stop shop' for all medical needs.”

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