AAmid a landscape of economic flux and shifting consumer sentiments, the commercial property sector has been on a roller-coaster ride. According to the most recent commercial finance stats from the Australian Bureau of Statistics (ABS), commercial property mortgages were up by a whopping 23.3 per cent when compared to the same period last year.
But, on a month-by-month basis, new loan commitments for business purchase of property (a typically volatile series) fell 4.7 per cent.
This fluctuating pattern has been a common story in the commercial property space the past few years, as businesses continue to try and find a new normal in the aftermath of the COVID-19 pandemic and in a high inflationary environment.
Speaking to The Adviser, Belinda Wright, head of partnerships and distribution at non-bank lender Thinktank, explained: “The past year has been challenging due to inflation, rising interest rates and a changing economic environment, all of which have affected consumer sentiment and the business sector.”
However, despite these generally negative influences, Thinktank has reportedly seen “solid commercial property lending activity” across different property asset classes.
Which pockets of commercial property are booming?
Wright noted that the lender’s latest Monthly Market Focus report had a particular focus on the industrial property space.
According to the April report, retail continues to be showing some recovery (although volatile), especially in secondary – even though sales look to be flat – and industrial remains very strong across the country.
“Our view is that this sector remains strong, primarily driven by structurally supported demand leading to exceptionally low vacancy rates,” Wright said.
She suggested that a range of published research and articles have underscored the industrial property sector’s attractiveness as a sound investment across Australia.
“Although certain markets, such as greater Sydney, have outperformed others, all regions have evidenced some degree of uplift. Notably, the current performance of markets such as Perth and Brisbane indicate further growth potential is in prospect,” she said.
Thinktank’s head of partnerships and distribution suggested that the lender expected to see “stable to good performance” in key sectors including industrial and well-supported segments such as childcare and student accommodation.
In fact, she added that its confidence in the commercial/industrial property market had led the lender to introduce a lease doc offering, providing standalone servicing and a committed loan term of up to 30 years without rollovers, annual reviews, or reassessments (where the lease has at least two years remaining from the settlement date).
“In recognition of the robust rental market, we also consider 100 per cent of the rent for servicing without applying any shading,” she noted.
As demand for commercial property rises, so does the likelihood of values increasing, especially with falling interest rates on the horizon.
Anticipating market shifts, Thinktank has also raised its maximum loan sizes to cater to Full Doc Commercial and SMSF transactions up to $8 million. Moreover, its Mid Doc Loan now provides lending solutions of up to $6 million, based on self-certification and several options to support income documentation.
