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Where have we come from, and where are we headed?

The past 7 years have seen unprecedented growth in all Melbourne and East coast real estate markets and whilst the immediate past 2 years have seen the residential market pull back by up to 15%, depending upon the locality and price point of the asset, the commercial market has continued to rapidly move ahead.

Progression of the Commercial market in the past 7 years has been due to many factors:

  • Low returns available on term deposits when compared to those on offer with commercial property
  • Substantial under supply of quality stock in a growing economy
  • Pending shortage of both Industrial and commercial land
  • An increasing reliance on imported goods and the housing for the distribution thereof.

Pressure points are seen in shortages of:

  • High tech office space not only in the CBD but in many inner and outer locations.
  • Massive distribution / logistics centres in the outer ring road locations backed up by smaller inner transfer facilities for the same goods.
  • Smaller industrial facilities housing the myriads of service industries which support the economy.
  • Major operators such as Bunnings, large scale supermarkets, Office Works in newly developed suburbs both in Melbourne and regional locations.
  • Medical facilities and childcare facilities for an expanding population

Commercial rents have risen substantially and are still rising with rates of return being compressed by almost 1.5% over the past 2 years.

The combination of rising rents and lower cap rates have resulted in massive increases to value and developers are taking advantage of this.


Going forward we see more and more of the above.

With a return of the Federal Government, official cash rates dropping and the recent loosening by APRA there will be more downward pressure upon acceptable rates of return on investment.

Together with rising rents, an increasing population and a continued shortage of stock for some time to come there will be a substantial continued lift to commercial values across the board.

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