Commercial activity could increase in 2024.

Commercial transactions could start to rebound in 2025, with lower prices starting to appeal to buyers along with the potential for interest rates to be cut, according to Ray White Commercial. Ray White Head of Research, Vanessa Rader, said transaction volumes were lower last year as confidence was low, but things are starting to change.

“Last year we saw many owners reluctant to transact and adopt a ‘wait and see’ attitude, this year we expect to see an increased need by vendors to bring their assets to market which will impact turnover levels,” Ms Rader said.

“Encouraging for 2024, the stagnant feel of 2023 will move and sentiment shifts, either positive or negative, will result in property decisions being made and opportunities presenting themselves, resulting in some turnover activity rebound for the year ahead.”

Ms Rader said that after a difficult few years, the office sector could start seeing renewed interest from investors. “We saw in 2023 a turnaround in activity for the office sector,” she said.

“This sector was leading the charge in 2022, recording more than 34 per cent of all transactions, and representing close to $23 billion in sales. However, uncertainty surrounding the future of office and yield increases saw this sector off the boil, reducing volumes to just $10.8 billion.” She said that the higher vacancy rates we’ve seen since COVID began will continue to weigh on the sector.

“Offshore interest has declined, and investment yields are expected to be further pressured upwards until occupancy improves and the outlook for face rents stabilise,” she said. “Opportunistic buyers, however, are likely to seek out assets due to recent price declines in anticipation for the future rebound of the office sector.”

According to Ms Rader, industrial assets continue to be the leaders in the commercial space with 29.4 per cent of all sales last year. This was up from 25 per cent in 2022. “With construction activity remaining limited across the industrial sector, the mismatch in supply and demand has ensured this asset class is one of the more favourable for many investors,” Ms Rader said.

Meanwhile, retail saw 21 per cent of all investment activity, with some larger assets changing hands last year. Ms Rader said the sector will likely remain quiet until interest rates start to fall. She also noted that across the alternatives market investment activity was steady, with transaction volumes growing to more than $4.2 billion.

“Many investors are now more selective when considering these types of investments and are ensuring assets have particular features including a good location and have strong lease covenants,” she said. “As yield levels grow, values are compressed, and greater distressed activity is starting to emerge by less experienced investors who have been navigating these sectors in the last few years.”