High-quality office space seeing ongoing demand
As businesses continue trying to woo workers back to the office, demand for high-quality office space continues rising. Ray White Commercial Head of Research, Vanessa Rader, said businesses have been looking at creative ways to improve their office spaces – including reconfiguring the working environment to provide flexibility and collaboration or relocating to new premises.
“The flight-to-quality internationally is real, with prime leasing deals representing as much as three-quarters of all transactions, improving vacancies across the premium and A-grade end of town in some markets,” Ms Rader said.
“Markets around the world have been impacted, with major cities such as New York recording vacancies eclipsing 20 per cent, and Toronto as much as 15 per cent. European cities such as London and Berlin have high vacancies, yet sit below Australian levels, while Asian markets such as Tokyo and Hong Kong are showing signs of improvement.”
In Australia, Queensland remains the standout office market, with Brisbane’s CBD one of the few to post a lower vacancy rate, with Brisbane’s fringe having the greatest non-CBD take up, while the Gold Coast boasts the lowest vacancy rate in the country, Ms Rader said.
“Brisbane CBD currently boasts a prime vacancy of 12.5 per cent compared to 10.4 per cent in the secondary market, however, we cannot look at this data in isolation,” she said. “There has been strong take up recorded in the CBD over the last 12 months of 52,543sq m, which has eclipsed the secondary market.
“For markets in both Queensland and Western Australia, population growth has spurred on office activity with positive take-up recorded across both quality grades, unlike other states. However, the bulk of activity remains in the prime end of town, highlighting this flight-to-quality.”
Ms Rader said the Sydney CBD is seeing vacancies in both prime and secondary buildings at similar rates of 11.4 per cent and 11.7 per cent. “While the absorption of space for Sydney’s markets, such as the CBD and Parramatta, has not had the volume to move the vacancy rate downwards, it is clear new tenants are fleeing older-style stock for shiny, premium and A-grade offerings,” she said. “Continued new supply of high-grade assets is not allowing these markets to reset after the COVID-19 disruption.”
Ms Rader also stated the Melbourne CBD was the only location to see both prime and secondary occupancy levels fall. “This market has been the worst affected by pandemic lockdowns, and looking ahead its improvement will likely be hampered by high volume of supply additions with only partial precommitments,” she said.
“Over the last 12 months the Melbourne CBD has lost over 90,000sq m of tenancies, with close to 70 per cent of these from secondary assets. This raises the question of what will the future hold for secondary office buildings?”
Melbourne investors eye off regional Queensland commercial property
The commercial property market in regional Queensland is experiencing a surge of interest from Melbourne investors, as the state’s booming population continues to grow.
According to Raine & Horne, Queensland property is becoming more attractive due to factors such as demographic shifts, economic dynamics, an upsurge in tourism and market forces.
The Gold Coast in particular has experienced a large transformation, with the return of tourism to the region sparking new interest in the local retail sector. With long-standing vacant shops now finding tenants, retail vacancies have dropped below 5% and yields are ranging between 5% and 6%.
Raine & Horne also said the industrial market on the Gold Coast remains robust, especially in smaller strata-owned developments which are witnessing high demand for both sales and leasing. They said that older industrial showrooms are undergoing facelifts to align with current trends, leading to higher annual rents. Notably, despite interest rate hikes, sales yields have remained unaffected.
In contrast, the Townsville retail sector has experienced some challenges, with many retailers downsizing or closing due to tightening household budgets and interest rate increases. Furthermore, the ongoing effects of the COVID-19 pandemic have contributed to population growth on the Sunshine Coast, with around 47,000 individuals migrating to the region.
This population influx has led to some big jumps in sales prices for commercial assets, highlighted by the increase in industrial unit prices, where recent units were sold for $4,000 to $6,000 per square metre, up from $3,100 per square metre in previous transactions.
Notably, Melbourne investors are looking beyond their own city to the flourishing regional markets of Queensland. Raine & Horne said that changes in retail leasing legislation in Victoria have encouraged investors to explore commercial property opportunities in the region.
One instance is Hervey Bay, with the market witnessing an influx of interest. Retail yields are ranging between 7.5% and 8%, vacancies at approximately 5%, and rents falling within the $250 to $300 per square metre range.
Mackay is also experiencing a rise in the value of second-hand buildings, primarily due to the escalating costs of construction. Soaring construction expenses have made new developments less feasible and as a result, the gap between new and second-hand commercial properties has narrowed, with the latter gaining value due to easier refurbishment and immediate usability. Industrial rents in Mackay currently range between $165 and $185 per square metre, with yields between 7.5% and 8%.
Unlocking the benefits of invoice finance
Maintaining a healthy cash flow can often be the difference between success and failure for a business. This is particularly true for businesses that sell products or services on credit terms.
This is where the power of invoice financing can help by bridging the gap between the period when a sale occurred and when you finally receive payment, which can be more than 30 to 60 days. Here are some advantages of invoice financing:
Immediate cash
Unlike traditional loans that introduce debt onto the balance sheet, invoice financing offers another way. Borrowing against your invoices means that you can gain access to the money you are owed immediately. You can then deploy it faster into your business.
Repayments aligned with inflows
Unlike a conventional loan that might be paid down monthly, invoice finance can align with your sales cycle. Repayments are only made when the original invoices are settled by your clients. This means that businesses only need to meet their repayment obligations when they are paid. This can help ease the burden of fixed-term repayments and increase cash flow flexibility.
Help larger contracts
When your business grows, you will typically find that the size of the contracts you are receiving will also grow. However, larger businesses and organisations normally have worse payment terms. Invoice finance allows you to capitalise on these larger contracts while still managing your cash effectively with larger clients.
Business growth
Sustained growth will rely upon steady cash flow. Invoice financing frees up business owners to channel their efforts into attracting new clients and driving sales, rather than chasing unpaid invoices. It also enables the extension of credit lines to customers, strengthens supplier relationships, and allows businesses to focus on growth.
Fast approvals
One of the biggest advantages of invoice finance is that the application process is incredibly streamlined. Oftentimes, businesses are able to select the unpaid invoices they would like to finance and get them funded quickly. Once the process is set up initially, ongoing funding is quick and easy for most businesses.
Reducing risks
Late payments and bad debts pose significant threats to businesses. Legal recourse is an option, but it’s expensive and time-consuming. Invoice financing addresses this issue by conducting independent credit checks on debtors. Many invoice financing providers even take out insurance against non-payment.
