As reported in our Half Yearly report for the July to December 2016 period, greater investor and owner occupier demand for retail and other commercial properties is driving pricing growth across Melbourne’s inner south east region. These buyers are taking advantage of low interest rates to secure these types of properties in prominent locations. This is pushing yields lower, despite general rises in annual rents.
For retail properties, owner occupiers tend to focus more on location than investors. While an owner occupier looks to purchase a retail property in the right location to grow their business and service their customers, investors are more likely to consider yields and future capital returns as priorities. For this reason, investors often prefer a reliable, long-term tenant when purchasing a tenanted property.
Due to a focus on location and business growth, owner occupiers may be prepared to pay a premium to secure the right retail property. This is particularly the case if these are purchased through an SMSF, with the added potential bonus of future capital growth. As a result of this type of pricing growth, and rising values in general, investors have been accepting lower yields since 2016 and in the first half of 2017.
Retail properties sold with vacant possession are ideal for owner occupiers. Alternatively, investors could put tenants into vacant properties to generate a revenue stream. Further, development opportunities for some older retail properties allow for additional levels, rooms and functionality (STCA) for owner occupiers and investors alike.
For more information, contact Matt Nichols on 0418 186 488 or firstname.lastname@example.org