All we’ve been hearing for the last couple of years is how difficult Melbourne’s property market is, especially for developers and commercial landlords.
And it has been tough. Unhelpful Government settings, labor shortages, rising costs, high interest rates, low productivity, no confidence. We know the reasons.
Yet as difficult as it has been it seems to me that activity levels are high. Where there is a will there seems to be a way. We’ve seen it before. In difficult times the good operators shine while the punters hoping to get lucky disappear.
From the activity in our firm we can see:
1. A high level of leasing activity, whether it’s tenants who took too much space pre-Covid or took too little during Covid, or simply want to use space more efficiently or to acknowledge working from home, tenants are moving to downsize or upsize or in search of better amenity. Lots of deals are being done. And landlords with a special offering are capitalizing. Rents might be lower and incentives higher but tenants and pragmatic landlords are transacting.
2. Half full B grade office buildings have become interesting prospects for upgrading or conversions, and are transacting at the right price.
3. A large number of new residential projects are about to hit the market. Whether it’s re jigged schemes or high end downsizer apartments or build to rent, savvy developers are bringing projects to market. Our firm alone will be launching 10 or 11 new projects over the next month or two. Markets are deep especially for developers who know where to look. And good product is selling. No doubt the temporary return of stamp duty savings has been an accelerant. And like with office space there seems to be an attraction to quality. Oh, and there is also a housing shortage just crying out to be filled.
4. Money for projects is flowing. Not so much from the big banks. While they have focussed on home loans, private credit has grabbed the opportunity to fund developers. And its there in spades for developers with a track record. And when even more money is needed – as is often the case – the deals just get more creative.
Tough times always seem to create opportunity. Perhaps it’s human nature to persevere, to be enterprising, to be creative, to move forward, to just do stuff. Or perhaps there is such enormous vested interest in the property sector that ultimately it’s irrepressible.
