COMMERCIAL TRENDS POINT TO A STRATEGIC SHIFT IN 2025

The commercial property market is entering a period of strategic change, with new trends reshaping investment opportunities across various sectors. Ray White Group head of research Vanessa Rader has identified several key trends that will influence the market in 2025, highlighting a shift away from traditional asset classes.

“The retail sector is experiencing an unexpected resurgence, particularly in prime locations,” Ms Rader said. “Sydney’s CBD retail core exemplifies this trend, with 25 per cent of shops now representing high-end brands, challenging previous predictions about brick-and-mortar retail’s decline.”

Ms Rader said there are changes in the industrial sector heading into 2025.

“While headline vacancies remain low at sub 2 per cent, growing incentives and stabilising rents signal a cooling in traditional warehousing,” she said. “However, specialised assets like cold storage facilities and data centres continue to outperform, maintaining tight yields and attracting premium investment.”

The office sector is undergoing significant changes, with CBD vacancies ranging from 9.5 per cent to 18 per cent.

“Rather than viewing this as purely negative, we’re seeing innovative repurposing of office spaces, particularly in secondary markets,” Ms Rader said. “Premium and A-grade properties are attracting tenants through enhanced amenities and sustainability features, with ESG considerations increasingly driving occupier decisions.”

Cash Rate Update | held at 4.35%

According to Ms Rader, alternative assets are becoming mainstream commercial investments. “Childcare centres, medical facilities and service stations are now comparable to traditional asset types in terms of yields, growing increasingly attractive to institutional investors,” she said.

Regional markets are also attracting renewed interest, with Queensland leading regional investment at over 40 per cent of total turnover. “Strong interstate migration, particularly to Queensland’s coastal markets, coupled with hybrid work arrangements, continues to reshape regional demand fundamentals,” Ms Rader said. The hospitality sector is showing promising signs of recovery, with recent transaction momentum exceeding long-term quarterly averages. “These assets attract investors through diverse revenue streams across food and beverage, gaming, accommodation and retail, with limited new supply maintaining their appeal,” she said.

COMMERCIAL PROPERTY MARKET POISED FOR RECOVERY IN 2025
The Australian commercial property market is set for a rebound in 2025, amid changing market conditions and renewed investor interest, with core assets expected to lead the recovery. According to Knight Frank’s Australian Horizon 2025 report, time is of the essence, and investors who acquire assets following the market adjustment, but before the recovery begins, are positioned for strong growth.

Chief economist Ben Burston highlighted the opportunities currently available in the market. “Our central thesis is that core assets in the Australian market now represent good value for investors, with strong prospects for cyclical recovery starting in 2025 and long-term growth,” Mr Burston said.

The retail sector is experiencing its strongest investor demand since 2015, driven by improving asset performance and rising real incomes. This surge in interest is expected to contribute to a recovery in capital values due to limited available stock.

Industrial markets are showing signs of divergence, with rental performance varying significantly between regions. Sydney’s Outer West and West Melbourne face pressure from high supply levels, while South Sydney and East Melbourne demonstrate more resilient market conditions.

The office sector continues to contend with high vacancy rates, however new development slowdowns, particularly in Sydney and Brisbane, are expected to drive face rents higher on new projects.

Build-to-rent (BTR) development is gaining momentum, though its success depends heavily on policy changes and market acceptance. “The perceived success of schemes targeting the middle of the rental range will be important in widening awareness and understanding of BTR.” Mr Burston said.

Interest rates remain a significant factor in shaping market recovery, he said. “Investors will need to be tuned into the evolving debate on neutral rates and ensure their strategy is resilient to multiple scenarios for the level of long-term interest rates,” he said. “Now is the time to buy, and this optimal window will extend into 2025.”

ESSENTIAL SERVICE PROPRTIES LEAD COMMERCIAL MARKET SURGE
Commercial properties showed remarkable strength in 2024, with the essential service sectors driving significant growth across the Australian market.

New data from Burgess Rawson reveals that the average sale prices for premium commercial assets have increased by 7 per cent, reaching $3.9 million compared to $3.64 million in the previous year.
The convenience retail sector has emerged as a standout performer, with transaction volumes increasing by $45.5 million to reach $178.2 million in 2024.

Yields in this sector have stabilised at 6.38 percent, with high levels of investor confidence in fuel stations, thanks to their reliable cash flow. Fast food properties have become increasingly competitive, with yields tightening from 4.56 per cent to 4.32 percent.

Despite maintaining 16 transactions, the sector has seen sales volume grow from $70.5 million to $85.6 million. The medical property sector has also experienced solid growth, with sales volumes nearly doubling to $178.8 million, while the sector maintained steady yields around six per cent.

Childcare properties continue to attract selective investors, with returns averaging 5.44 per cent and total sales reaching $217 million across 39 transactions.

Burgess Rawson partner Matthew Wright said investor confidence remains strong across key asset classes. “The data points emphasise a nuanced market in which essential service sectors remain highly attractive, with strategic investor interest varying by asset type.” Mr Wright said. “The yield compression paired with stable transaction rates indicates sustained demand for these recession-resistant and highly desirable assets.”

5 WAYS ASSET FINANCE CAN HELP YOUR BUSINESS THIS FESTIVE SEASON
The festive season is a time of opportunity for businesses, but it also comes with challenges like increased demand, tight deadlines and cash flow pressures. Asset finance can be a powerful tool to help businesses work their way through the season smoothly, while setting up for long-term growth. Here are five ways asset finance can give your business a competitive edge during this busy period.

Upgrade your equipment to handle holiday demand
Whether you’re a retailer gearing up for a sales boom or a construction business looking to meet project deadlines before years-end, having the right equipment is crucial. Asset finance allows you to acquire the latest tools, machinery or technology without upfront capital outlay. This ensures you’re fully equipped to handle the festive rush, while keeping your cash reserves intact.

Support seasonal expansion
If your business needs to expand operations temporarily, such as adding delivery vehicles, upgrading point-of-sale systems or leasing additional storage space, asset finance can cover the cost. Flexible repayment terms mean you can tailor financing to match your seasonal revenue spike, ensuring you don’t overstretch financially during quieter months.

Stay competitive with the latest technology
The festive season is a great time to upgrade outdated equipment or technology. From faster checkout systems to energy-efficient machinery, asset finance allows you to invest in upgrades that enhance productivity, reduce operating costs and keep your business ahead of the competition. Staying up to date also means you can deliver the high-quality service customers expect during this busy time.

Improve cash flow for holiday expenses
The end of the year often brings additional costs like staff bonuses, marketing campaigns and increased inventory. Asset finance can free up cash flow by spreading the cost of new equipment over manageable instalments. This gives you more breathing room to cover seasonal expenses, without cutting corners on growth opportunities.

Take advantage of tax benefits
Acquiring assets during the holiday season can offer some significant tax advantages. Many asset finance agreements allow businesses to claim deductions, such as depreciation or interest expenses, which help to reduce your taxable income.

By financing your purchases now, you can maximise deductions for the current financial year and start the new year on a strong financial footing.

WHY CHOOSE DEBTOR FINANCE?
Debtor finance is a financial arrangement where a business uses its accounts receivable (unpaid customer invoices) as collateral to secure funding. This solution is particularly beneficial for businesses with cash flow constraints due to slow paying customers. Instead of waiting 30, 60, or even 90 days for payment, companies can access a portion of the invoice value upfront, ensuring their operations run smoothly. There are a few different types of debtor finance options that will suit different businesses.

Invoice Factoring
Invoice Factoring involves a financing company purchasing your unpaid invoices and advancing a percentage of their value, usually between 70% and 90%. Once the factor takes over, they manage the process of collecting payments directly from your customers. This arrangement often suits smaller businesses or those looking to streamline operations by outsourcing their debt collection. By allowing the factor to handle customer payments, businesses can focus on their core activities, though this transparency may also become clear to your customers, which could impact their perception of your
business.

Invoice Discounting
Invoice Discounting provides a similar advance against unpaid invoices but differs in that your business maintains control over customer relationships and payment collections. The financing company remains in the background and your customers typically remain unaware of the arrangement. This option is especially popular with larger businesses or those that have dedicated team members for managing collections. With greater discretion and control, invoice discounting allows businesses to preserve customer confidence while unlocking the working capital needed to maintain smooth operations.

Trade Finance
Trade Finance works by directly funding supplier payments. Using purchase orders and invoices, trade finance means that your supply chain remains uninterrupted while reducing the strain on your working capital. This is particularly useful for businesses operating in industries with complex supply chains or significant upfront supplier costs. By bridging the gap between supplier payments and customer receipts, trade finance provides the liquidity required to meet operational demands without incurring additional debt. Each of these options has its own advantages and the right choice depends on your business’s size, industry, operational preferences and customer relationship management strategy. Speaking to a finance broker about your business needs is the best option to find what could support business prosperity and success.

PREPARE YOUR BUSINESS FOR THE NEW YEAR WITH EQUIPMENT FINANCE
The New Year is an ideal time for businesses to reflect on their progress and prepare for future growth in the second half of the financial year. This might mean a significant financial outlay, such as upgrading tools, investing in new technology, or replacing worn-out equipment to remain competitive. Equipment finance offers a flexible solution for acquiring the assets your business needs without significant upfront costs. Here’s how to take advantage of equipment finance to set your business up for success in the New Year.

Plan for growth with a strategic equipment audit
Start by assessing your current equipment and identifying areas for improvement. Are there any tools or machinery that are outdated, unreliable or inefficient? Are there gaps that could be filled with the right investment? By doing an audit, you can prioritise which assets to finance and ensure your business is well-positioned to meet increasing demands in the coming year.

Take advantage of flexible financing options
Equipment finance offers tailored solutions to suit your cash flow and business needs. Whether it’s leasing, hire purchase or chattel mortgages, the flexibility allows you to acquire necessary assets while spreading the cost over manageable payments. This means you can conserve working capital for other priorities, such as marketing or hiring staff, while still benefiting from the latest equipment.

Invest in technology to boost efficiency
The New Year is a great time to upgrade to cutting-edge technology. From faster payment systems to advanced machinery, the right tools can enhance productivity, reduce downtime and improve customer satisfaction. Equipment finance ensures you don’t have to delay these upgrades due to a tight budget, allowing your business to stay ahead of the curve.

Prepare for growth
If your business is anticipating growth, equipment finance allows you to scale operations without overcommitting financially. For example, you can finance additional delivery vehicles, expand manufacturing capabilities or lease temporary assets to manage seasonal spikes. By spreading the cost, you can align your repayments with expected revenue increases.

Unlock tax benefits
Did you know that acquiring assets through equipment finance can offer significant tax advantages? Depending on the type of finance you choose, repayments or depreciation may be deductible, lowering your taxable income. Investing in new equipment before the end of the financial year can also allow you to take advantage of immediate tax deductions under the instant asset write-off scheme.