The pandemic caused a lot of changes in the real estate commercial business in Australia over the past year. Now, they are getting ready for better times ahead.
Australia’s Economic Strengths: A Promising Foundation
Tim Church, the head of investment banking at Morgan Stanley Australia, shared this positive outlook at the yearly Australian Financial Review Property Summit, where many industry leaders were present.
According to him, the planning and adjustments we’ve been doing this year are like a warm-up, and he believes that 2024 and 2025 will be the most productive years ever. He pointed out some strong points about Australia, like its top-notch credit rating, almost 30 years without a recession before the pandemic, a good balance between debt and GDP, and a diverse economy that keeps expanding.
Population Growth and Demand Surge
Church also highlighted Australia’s growing population, expecting a 10 per cent increase over the next five years – the highest among developed countries. This growth is estimated to create a demand of $20 billion. He also mentioned the shortage of houses, especially for rent, and the stable conditions in the market.
Resurgence of Real Estate Commercial
Offices are becoming popular again as people return to work. Retail is transforming into more of an entertainment space to attract more visitors. On the other hand, the industrial sector is doing exceptionally well due to the rise in online shopping, leading to a higher demand for storage spaces.
Embracing New Opportunities: Build-to-Rent (BTR)
There’s also a new opportunity called build-to-rent (BTR), which Angela Buckley, the Mirvac Group’s fund manager, sees as a great chance to provide more rental homes. She emphasized the need for collaboration between the government and private companies to make the most of this opportunity.
Tony Lombardo, the CEO of Lendlease Global, is positive about office spaces, especially high-quality ones. He suggests updating older office spaces or converting them into residential areas, calling for quicker reviews of planning regulations.
Talking about cities, there’s a push for revamping city plans. While Sydney is making progress, there’s a call for more changes to handle the influx of people. Andrew McDonald, the Global President of Cushman & Wakefield, stressed the importance of getting people back to offices for better work outcomes.
In the retail sector, Elliott Rusanow, CEO of Scentre Group, mentioned significant changes in shopping centres. For example, the Westfield Knox shopping centre in Melbourne is getting a $355 million upgrade, offering various activities like a basketball court, library, playground, community and co-working spaces, food court, and better connectivity.
Smart Tips for Investing in Commercial Real Estate
If you’re thinking about putting your money into commercial real estate, here are some simple yet crucial points to keep in mind:
- Do Your Homework: Take the time to thoroughly research the property, market trends, and any possible risks. Knowing what you’re getting into is key to long-term success.
- Location Matters a Lot: The place where the property is situated is super important. Think about how easy it is to get there, what the neighbourhood is like, and if it has the potential to grow. Choosing the right location is strategic.
- Money Planning is a Must: Create a detailed financial plan. This includes not just the buying cost but also ongoing expenses like maintenance and unexpected bills.
- Keep Up with Market Trends: Real estate markets change a lot. Stay updated on what’s happening now and what might happen in the future so your investments match what the market wants.
- Know Zoning Rules: Understand the rules about how the property can be used. Ignoring these rules can cause legal problems and limits on how you can use the property.
- Past Success Doesn’t Guarantee Future Gains: Just because a property did well in the past doesn’t mean it will keep doing well. Look at what’s happening in the market now before making decisions.
- Have a Clear Plan to Sell: Figure out how you’ll sell the property if you need to. Having a plan makes it easier to sell when you want to.
- Be Careful with Borrowing: Taking on too much debt might give you more money upfront, but it also means more risk. Borrow wisely and have a good plan to pay it back.
- Check the Environment: Look into how the environment might affect the property’s value. Skipping this step could mean unexpected cleanup costs or legal troubles.
- Get Legal Advice: Get professional legal advice for real estate deals. Legal stuff can be tricky, and having an expert guide you can prevent mistakes and disputes.
- Think About Tenant Quality: Consider the quality of potential tenants. Reliable and stable tenants contribute to the property’s long-term success.
- Spread the Risk: Diversify your investments by having a mix of different types of properties or in different locations. This helps manage risk better.
- Build Connections: Make connections and keep relationships in the real estate world. Networking can bring valuable insights and opportunities your way.
- Stay Flexible: The real estate world changes, so be adaptable. Adjust your strategies based on what’s happening in the market.
- Consider Professional Help: Think about getting professional help for managing the property. This ensures things run smoothly day-to-day for the best performance.
By remembering these simple tips, investing in commercial real estate becomes less daunting, and your chances of making smart and profitable decisions increase.
Conclusion
Doing good research on the market, understanding how the economy is doing, and being open to changes are key to succeeding in your investment. If you’re thinking about investing in 2024, see it as a chance to explore possibilities. Just like an artist carefully plans and thinks ahead, investors should plan well, look ahead, and always be ready to learn new things. Success in investing is like creating a painting – it takes careful steps, foresight, and a commitment to keep learning.
