The popularity of commercial real estate is set to grow as an increasing number of people look to the sector as a safe investment opportunity, according to one lender.
John Kolyvas, national commercial partnership manager at non-major lender ING Direct, said commercial real estate is steadily becoming more popular as the allure of residential investment fades.
The lender has also announced new commercial loans of $2 million or more will now have a discounted variable rate of 4.50%, which will apply to eligible applications unconditionally approved from 6 October 2015.
“As investment in residential property loses a little of its lustre, commercial property is looking increasingly appealing for its relatively stable growth and solid returns,” Kolyvas said.
“Commercial lending has been growing steadily in the past few years and in the current environment this is expected to continue,” he said.
Kolyvas isn’t the only person who has noticed more investors considering commercial real estate. MMJ Real Estate Sydney director Chris Johnson believes a number of factors are driving more activity in the sector.
“It’s no question that the [commercial real estate] market is hot right now,” Johnson said.
“In my opinion it’s a combination of people seeing the higher yields available in commercial property as residential prices rise and also what’s happening on the stock market at the moment as well,” he said.
While the higher yields are what many investors find attractive, Johnson said commercial real estate can provide some challenges that residential investors may not be used to.
“The general consensus is that investing in residential property is lesscomplex than commercial real estate, but in Australia we’ve got one of the most open and transparent markets and it’s something that can be picked up with a bit of work,” he said.
“The biggest issue for people who are going into commercial real estate is probably dealing with the vacancy rates.
“They tend to be a lot tighter in residential real estate, which gives you a better ability to always have an income. In commercial real estate vacancies tend to be higher, so it’s important you’re investing in the right type of property in the right area.”
Johnson recommends investors looking to take the plunge into commercial real estate consider small retail spaces or spaces in strata schemes.
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