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March 16, 2016

Commercial and retail luring Sydney’s residential investors


Investors in New South Wales are turning their attention to suburban Sydney leased commercial and retail properties, according to real estate agency Gunning.

Gunning’s principal, Malcolm Gunning, says traditional assets have been a strong focus for local investors after the banks increased residential investment interest rates in the middle of last year.

“These aren’t the fancy properties you see in the property sections, they’re solid commercial and retail properties that give good return on investment,” Gunning says.

“We believe local investors are now moving away from residential properties and are seeking suburban commercial and retail investments that have good returns with development upside, resulting from the Baird Government’s changes to zoning for many of the established suburban retail strips.

“These properties have been a sleeper in comparison to residential properties and their appeal has activated due to rezoning of areas like Rockdale, Kingsgrove, Revesby and Bankstown to B4 Mixed Use that allows retail, office and residential development.

“As a result, sites have been amalgamated for ground floor retail business and upper level residential.”

Explaining that the strips lie close to the new improved public transport hubs, he adds that “after the upgrade to the railway lines, they’re very desirable because the infrastructure’s already in place”.

“Buyers are looking for properties with a 4 per cent yield and potential growth,” Gunning says, adding that he believes the renewed interest in retail and commercial will continue throughout 2016.

“[We] believe this is a direct flow on from the changes to zoning and banks’ preference to lending more to commercial investors, in particular for property within Sydney’s 20-kilometre ring,” he says.

Colliers International research analyst Sas Liyanage says the Sydney metro markets are embracing a “long awaited evolution, underpinned by a historically high infrastructure spend and a state economy that remains the envy of the nation”.

Vacancy rates in metro markets, Liyanage says, have continued in their downward direction, driven by a lacklustre supply as well as a significant withdrawal of stock.

About Angela Young

Angela Young is the Associate Editor of Australian Property Investor magazine.