Industrial property will outperform in 2022

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Industrial real estate will continue to be a standout performer in the commercial sector, while CBD office and retail businesses may struggle in 2022.

That’s the belief of appraiser Nick Barlow of Suburbanite, who predicts another strong year for commercial real estate.

In particular, the commercial real estate market and the industrial sector remain good choices for investors, according to Mr. Barlow.

“Industrial will be the standout performer in the commercial sector well into 2022,” said Mr. Barlow.

“Industrial real estate might not be as exciting as many people see as a warehouse behind an industrial area, but it has actually proven to be a really solid investment and a desirable product.

“What really benefited commercial property was the lack of impact from the lockdowns as most businesses were able to continue operating.

“We’ve also seen the huge increase in building and home renovations, and many businesses needed additional storage space, as well as other businesses offering products through places like Amazon. That really saw the flow-on effect.”

Mr Barlow said the nature of commercial property will continue to evolve given high demand.

“What has also happened is that new industrial areas are now being developed that contain an office section or even a café and they are now mixed-use developments,” he said.

“We’re seeing estates that were traditionally open Monday through Friday, but now with the inclusion of things like microbreweries and artisan bakeries, these are becoming true business hubs that are open seven days a week.”

Mr Barlow said that while commercial property will continue to appreciate, growth rates may slow.

“We have just experienced a year of tremendous pressure on the availability of developed land, which has boosted growth and put further pressure on yields,” he said.

“However, these growth rates will slow due to increased inventories, already tight yields and the prospect of rate hikes.”

Given the changes the world has seen over the past 12 months, Mr. Barlow believes essential services will continue to be a destination for investors in 2022.

“Tenants for essential services like medical, food and beverage, fuel and childcare have also been outstanding, and this trend is expected to continue for at least the next few years,” he said.

“Yields have continued to fall as landlords seek security and a return that is still better than banks can offer.”

After a difficult few years, Mr. Barlow believes CBD office and retail will continue to struggle over the next 12 months.

Tourist cities could also see a slowdown from the record influx of people who have seen them.

“Areas that will have problems will be areas with poor infrastructure, low government spending and high vacancy rates,” Mr Barlow said.

“In small regional areas that have seen an influx of local travelers during COVID, visitors will return to normalized levels throughout the year, impacting those markets accordingly.

“Serviced apartments and AirBnb will also struggle throughout 2022 as they begin to feel last year’s downtime and last minute cancellations.”

Mr. Barlow sees a slowdown from the unprecedented demand and growth that has been a feature of the past 12 months.

“In general, as conditions stabilize, the better located properties continue to be sought out and those in secondary locations that have performed well in favorable conditions are usually the first to feel the impact as some of the heat leaves the market. ” he said.

Mr Barlow’s expects Brisbane to surpass both Sydney and Melbourne thanks to ongoing interstate migration.

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