Not getting returns from residential property? Investing in commercial property can be fruitful if you get it right with hotspots and black spots.
Investing in the commercial property sector makes sense right now. With the population increasing and more people participating in the Australian workforce than ever before, the demand for commercial real estate is very strong. So, what’s hot at the moment and are there any commercial sectors that investors should exercise caution in?
It is no secret that the Australian population is ageing. With that comes a shift in the proportion of people who are more likely to receive medical support.
Investors are also appealed by the strengths of businesses within this industry. The businesses operating within the medical industry primarily use non-discretionary patient spending to form a large proportion of their income. Relying less on the patients to foot the bill.
Industrial real estate
With the rise of e-commerce and online shopping, there has been an increased demand for industrial warehouses, especially in major metropolitan cities. These warehouses typically service storage, distribution, logistics operations of consumer goods. They also play a major role in the import/export activity of businesses and, in turn, the country.
The growing demand for warehouse space is documented in recent building activity data, which shows that a staggering $1.1 billion was poured into new warehouse construction in the June 2018 quarter alone.
Industrial warehouses are essential for expanding cities. However, a lot of prime industrial land is already occupied by newly developed residential real estate in Australia’s growing cities. What this means for investors is that demand for industrial warehouse real estate in strategic locations is high and likely to remain so for the foreseeable future.
The changing landscape in the retail sector
Retail real estate, on the other hand, is experiencing a downshift, largely due to the influence of online shopping.
Consumers are simply buying less in bricks-and-mortar shops and this is making life tough for traditional retailers. Occupancy rates are declining and industry experts predict that this trend will continue over the coming years. Retail property owners will either have to adjust to lower rents or explore alternative uses for their real estate.
That said, it’s unlikely that shopping centres will disappear completely overnight. But if they want to survive, shopping centres will need to re-imagine their purpose.
This is a mere snapshot of the commercial real estate scene for investors. It’s worth remembering that it’s a diverse market and growth opportunities are not confined to one sector. At InvestorKit, we take the guesswork out of investing for first-time investors and experienced investors alike. Request your free strategy session today to find out how we can help you build your wealth and enjoy the benefits of positive cash flow property investing.
Arjun Paliwal, InvestorKit