7 trends to shape the commercial market in 2022

Business owners are in a dilemma whether or not to continue renting office space as businesses reopen. As a result, owners and investors may notice the consequences on their income.

In the recent Monthly review for December 2021 from Herron Todd White (HTW), commercial real estate experts shared industry trends that could influence possible real estate investments and activities in the coming year.

Here are the seven trends that are coming shaping the commercial market in 2022:

1. More incentives, less rent

With no clear indication of how or when a big transition to offices would occur, HTW Sydney director Scott Russell said “higher incentives and lower rents are needed to find tenants”.

Landlords have had to deal with the biggest vacancy in almost 10 years, with Mr Russell citing data from the Property Council of Australia showing a vacancy rate of 9.2% in July 2021, down from 8.5% in January 2021.

2. Stronger demand for office condominium inventory

While the closures have had a huge impact on rentals in Sydney, demand for stock in the strata market has never been higher.

Some deals have reached well over $20,000 per square yard, with downtown office inventory consistently topping $16,000 per square yard, Russell said.

3. Preference for small offices

In the Hunter area, real estate appraiser Ed Thwaites said “small office sales and rentals activity has been quite strong.”

Mr Thwaites said demand came both from occupants of larger offices who chose to downsize due to flexible working as well as start-ups.

4. Flight from suburbs and CBD outskirts to CBD

According to HTW Melbourne assessor James Feeney, vacancy rates have increased across all Melbourne CBD office categories throughout 2021, rising from 8.4% to 10.4% in the six months prior. on July 1, 2021, based on Property Council of Australia (PCA) Office market report.

Due to the lack of demand for office space, headline rents are under pressure, resulting in incentives of up to 30-40%, depending on the length of leases.

Occupiers of offices outside the CBD are attracted by these significant incentives, enticing them to relocate from the suburbs and fringes of the CBD to the CBD.

“As CBD vacancy rates increase, along with incentives, we expect to see a flight to quality out of suburban and marginal CBD locations and into the high-quality CBD office space on offer for at roughly the same total occupancy cost,” Feney explained.

5. Repositioning C and D grade buildings

Grade C and D office space will be hardest hit by the sharp drop in vacancies, Mr Freeney said. And for this reason, he felt that “it is possible that we will see many of these types of buildings being repositioned for alternative uses such as residential”.

6. Quality suburban commercial properties

In Brisbane, Edward Cox, Associate Director of HTW, said: “COVID-19 has created a real need for quality suburban assets as businesses have stopped traveling to the CBD and moved to local office arrangements. more flexible.

Tenants generally seek commercial properties in a location with good access to major commuting routes, transportation, retail and parking options.

7. Homeowners looking for commercial assets

The homeownership market has seen the biggest change in 2021, according to Cox.

“There is currently very strong demand from homeowners for assets under $7.5 million. Low mortgage rates have seen a significant gap open between rental and ownership costs. Strong demand has seen capital value levels increase by up to 30% since the start of 2021,” he said.

For example, Mr. Cox shared about a two-story office building in Fortitude Valley that sold for $2 million “reflecting a rate in excess of $8,000 per square meter of net leasable area”, which would sell for 20 to 30% less just over a year ago. The current demand for quality office buildings is highlighted by this sale.

The same trend can be seen on the Gold Coast, reported HTW director Ryan Kohler.

“Owner-occupiers have flooded the market as buying can often be much cheaper than renting and investors are looking for opportunities,” he said.

Mr Kohler said returns on sales per owner occupancy could drop as much as 5.5%, depending on the market. However, investor sales are above this, but with a decrease in volume.

He mentioned a Strata title office in Varsity Lakes sold in March 2021 for a starting yield of 6.38% as a recent example.



Property refers to something tangible or intangible over which an individual or business has legal rights or ownership, such as houses, cars, stocks, or bond certificates.

7 trends to shape the commercial market in 2022

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Last update: January 17, 2022

Posted: January 18, 2022