With interest rates still moving upward, commercial investment activity continues to take a hit.  Both vendors and buyers have been more cautious with their property decision making, and various investors have exited the market due to the greater difficulty and increased cost of financing. However, there has still been more than $17 billion in sub $5 million sales during the year to May 2023 - so what have been the assets of choice? Reveals, Vanessa Rader, Head of research, Ray White Commercial.

1. Retail shops

The affordable price point of these properties has been the main drawcard for this asset type, averaging $1.01million. There has been so much conflicting information about the future of retail, however, this has not deterred investors seeking out suburban shop fronts, with assets transacting $3.7 billion this last year. 

2. Industrial freehold

Industrial has been the favourite investment class to purchase over the last few years. This has continued into 2023, with any smaller freehold assets in strong demand by investors and owner occupiers. Future potential is a key consideration in this sub $5 million price point.

3. Industrial units

This asset type has been one of the favourites over the last few years for ‘mum and dad’ investors or first timers, together with small business owners looking to shelter from rising rents. These small investments were also used as storage units by some buyers, with the growth in the ‘man shed’ phenomenon over the last few years. The average sale price of sub $900,000 is an attractive price point, fuelling continued investment across the country.

4. Office suites

Despite the negative press across office assets due to the increase in work from home, buyers are continuing to seek out quality office assets.  Again, price point driven with the average sale price $878,000, buyers have been active in NSW and Victoria with an uptick in ACT, Queensland and WA locations.

5. Development sites

Larger holdings across all zoning has been the next active asset class, residential the clear leader however industrial not far behind. Buyers looking to landbank or capitalise on future opportunities, albeit at the right price.

6. Hotel and motel

While there are limited opportunities in the sub $5 million price range, we have seen a number of regional assets transact over the last 12 months growing this investment share.  Older style motels are a favourite of owner occupier operators and seasoned investors for redevelopment opportunities during a time where domestic travel continues to be at a high rate.

7. Showrooms

An asset which is quasi retail and industrial, there continues to be demand, notably for tenanted investments. These assets have an average sale price of $1.42 million, with the bulk of transitions in NSW and WA. Showroom assets are often strata titled and considered similar to industrial units by some investors.

8. Service stations

A fan favourite for the private investor due to their strong, long-term lease covenants, service stations are a “set and forget” asset. The continued income stream is an attractive drawcard, however, prices often eclipse $5 million, which is why the smaller price range only represents a small proportion of the investment pool.

9. Childcare

Similar to service stations, the long-term income stream, tenant-paid outgoings, and land tax concessions in some states are attractive, however, many childcare assets have an average price in excess of $5 million. The sub $5 million price point is highly demonstrative of smaller or regional assets which have transacted, averaging just over $2 million over the last 12 months.

10. Pubs

One of the most sought after investments last year, the pub market broke new records in investment activity, particularly in NSW. Over the last year, however, volumes have decreased and smaller sub $5 million investments are few and far between, typically in regional markets.
By, Vanessa Rader, Head of research, Ray White Commercial

Which sub $5 million assets are commercial investors buying?

By, Vanessa Rader, Head of research, Ray White Commercial.