OPINION: Commercial property around the globe faces another unhappy downturn. But the outlook is unlike either of the previous collapses. Today’s downturn is largely a question of price.
, which has dropped around 20 per cent in value from its late 2021 highs, the repricing of commercial real estate happens in slow motion.Sales of Australian commercial real estate slowed dramatically in the June quarter.The COVID boom has come to an end, not with a collapse in price, at least not yet, but in a stand-off hiatus.
The boom sector of the pandemic, logistics real estate, actually slowed more than office and retail. And the slowdown was most noticeable at the smaller end of the market with the value of sales in the $1 million to $10 million bracket was half the level of a year ago. , that it was “hard to justify” buying an industrial property on a yield of 3.5 per cent, when the ten-year government bond yield was 3.4 per cent.
The graph is also a reminder that the level of inflation will be a key determinant in the new real estate pricing. They argued that the two AREITs in that sector, the Charter Hall Retail REIT and SCA Property Group, should be “better supported” in a tougher retail market. Chopra argues that the scarcity factor – the fact that some properties very rarely trade – needs to be considered in assessing the new price level.
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