Top 10 commercial property asset types revealed

Commercial vendors and buyers have become more cautious as interest rates have been rising. Nevertheless, there were still more than $17 billion worth of sub-$5 million transactions conducted during the year to May 2023, according to Ray White Commercial Head of Research Vanessa Rader.

The asset types that attracted the most activity were:

• Retail shops = $3.7 billion.
• Industrial freehold = $3.5 billion.
• Industrial units = $3.3 billion.
• Office suites = $2.0 billion.
• Development sites = $623 million.

The top 10 list was rounded out by:

• Hotels / motels = $499 million.
• Showrooms = $390 million.
• Service stations = $191 million.
• Childcare = $185 million.
• Pubs = $150 million.

Meanwhile, there were $2.7 billion of ‘other’ transactions.

1. Retail shops

“The affordable price point of these properties has been the main drawcard for this asset type,” according to Ms Rader. The “conflicting information” about the future of retail “has not deterred investors seeking out suburban shop fronts”.

2. Industrial freehold

Industrial has been a favoured investment type over the past few years, with both investors and owner-occupiers keen on small freehold assets. “Future potential is a key consideration in this sub-$5 million price point,” Ms Rader said.

3. Industrial units

Ms Rader said industrial units were popular with mum-and-dad investors and small business owners seeking shelter from rising rents. “The average sale price of sub-$900,000 is an attractive price point, fuelling continued investment across the country,” she said.

4. Office suites

“Despite the negative press across office assets due to the increase in work from home, buyers are continuing to seek out quality office assets,” according to Ms Rader.

5. Development sites

Ms Rader said development sites – particularly residential ones – were popular with buyers looking to landbank or capitalise on future opportunities, albeit at the right price. 

6. Hotels / motels

“Older-style motels are a favourite of owner-occupier operators and seasoned investors for redevelopment opportunities during a time where domestic travel continues to be at a high rate,” Ms Rader said.

7. Showrooms

Some investors favour showrooms, particularly if they’re tenanted. “Showroom assets are often strata-titled and considered similar to industrial units by some investors,” Ms Rader said.

8. Service stations

Service stations are popular with investors who want a set-and-forget asset with strong, long-term lease covenants and reliable income streams, according to Ms Rader.

9. Childcare

“Similar to service stations, the long-term income stream, tenant-paid outgoings, and land tax concessions in some states are attractive, however, many childcare assets have an average price in excess of $5 million,” Ms Rader said.

10. Pubs

Pubs were all the rage in the year to May 2022, but, over the year to May 2023, “volumes have decreased and smaller sub-$5 million investments are few and far between, typically in regional markets,” Ms Rader said.

One of the keys to succeeding with commercial property, whether you’re an owner-occupier or investor, is to secure the right finance package. Contact me if you’re interested in buying an asset and I’ll be happy to talk you through your options.