KEY TRENDS TO TARGET IN 2022
Overall we expect demand to increase from 2021 levels. Borders opening, increasing business confidence and a general back-to-business feeling will be the theme for the next year. However, I predict some of the recent drive in growth rates across the country will slow down slightly, as many private investors take a break from purchasing at the current rapid rate.
While they have been in lockdown and working from home, investing has been a high priority. This may change as many people book their overseas trips to the northern hemisphere for our winter. When people travel or are busy with work, investing can fall down the priority list. The JuneSeptember months are usually a little slower compared with other times of the year. Interestingly, Covid broke this trend and resulted in some of the busiest winter months for buying we have seen for the commercial asset class. But the distracted investor theme will be a side note to the overall momentum behind the market. Increasing confidence and the need to deploy funds into the market via cheap interest will be the driving force behind the continual demand for high-yielding commercial property well into 2022.
Demand for industrial assets from both the buyer side and businesses will continue to rise, though not at the pace seen at the height of the e-commerce boom in 2021. Yield compression has been so significant in some markets for industrial properties, compared with some other commercial asset types, that they may not show the same level of value as they once did.
Yields may be lower than they once were – for good reason. Vacancy rates are at record lows and construction costs have significantly increased in recent times, so supplying new industrial stock will be costly. In future this will underpin the value of existing industrial property and investors will continue to prioritise this asset class as a safehaven asset.
For retail, the signs are good as economic life looks to be growing, especially in Sydney and Melbourne. With households and businesses saving over $200 billion during the pandemic, many people are cashed up and ready to spend big for Christmas, revel in their first postlockdown summer and enjoy longawaited travel. If the UK or the US are anything to go by, we are definitely set for a V-shaped recovery, and a boom not dissimilar to that of the Roaring Twenties. Bricks-and-mortar stores will see strong increases in foot traffic as people are keen to get out of the house. Time will tell if this comes at the expense of e-commerce sales. Regardless, I see well-placed, high-quality retail assets as one to target in 2022.
The great working-from-home experiment seemed to go well at first. But as the pandemic endured, lockdowns, home schooling and isolation have ignited a newfound appreciation of the office space. Flexible working arrangements may continue, but some of this will be offset by businesses expanding their head counts. Currently, our employment rate is sitting at 4.6%, a growth rate of 2.2% over the past 12 months.
We have seen international companies investing billions of dollars into building more CBD office space in Australia, so they clearly see strength and opportunities in our markets. This is a testament to the fact that the office is not dead and will certainly rebound strongly in 2022.