Since the outbreak of the Covid-19 pandemic, demand for commercial assets positioned in key regional hubs like Newcastle, Gosford and Wollongong has risen dramatically says Ollie Ridley Associate Capital Transactions at Savills Australia due to a significant shift in working practices and a focus on flexible and remote working.

In particular, there has been growing demand primarily for office investments, however demand is also rising for build-to-rent sites and hotels as investors pursue more attractive property yields in regional NSW. Australian commercial property yields remain attractive on the global stage with offshore buyers making up 41% of buyer activity in 2021 with interest primarily from Singapore, Hong Kong and the United States.

According to Ollie Ridley, Associate, Capital Transactions at Savills Australia, due to a significant shift in working practices and a focus on flexible and remote working as a result of the pandemic, more companies are focussing on suburban and regional NSW office locations to reduce their overhead costs.

“Newcastle has emerged as one of the most resilient office markets, whilst a majority of Australian CBD markets have experienced a decline in demand and rising vacancy rates with many businesses shedding underused floor space.

“The Newcastle market has, however, outperformed other regional cities with only a marginal increase in vacancy rates from 7.6% in 2020 to 7.8% in 2021.

Mr Ridley went on to say that over the past 18 months, areas like Newcastle have seen yields contract significantly in an area that traditionally saw yields being achieved above 7%.

Two standout office transactions for Newcastle include the sales of 116 Hunter Street and 745 Hunter Street with yields hitting 4.41% and 4.01% respectively.

“Wollongong is also experiencing record investment levels especially with increased supply of A-Grade office space which is attracting more businesses and professional services into the Wollongong CBD“ he continued.

The sale of the ATO Building at 45-53 Kembla Street late last year, which transacted at 5.64%, highlights investor appetite for secure assets in key regional cities.

This year Wollongong is expected to see 6,695sq m* of new office supply come online in 2021 with a further 11,500sq m* due in 2022, which will no doubt ensure continued growth.

Gosford is becoming another key regional hub for investment and development as major infrastructure and residential development projects are set to transform the Central Coast city” he said.

Savills Australia is currently marketing one of the largest development sites in the centre of Gosford at 280 & 290-300 Mann Street, which has drawn national interest alongside international investors and developers. The property offers investors secure returns with the benefit of future development potential with a valuable DA-approval for 219 apartments.

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