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A rising cash rate has done nothing to quell interest in the commercial real estate space.
Raine & Horne has flagged the latest data from the Australian Prudential Regulation Authority (APRA) that showed commercial real estate lending has continued to grow over the past 12 months.
APRA has revealed that the commercial property loans held by Australian banks have increased by 12 per cent compared to the June 2021 quarter.
All up, total commercial property loan limits were $413.7 billion in June 2022 compared to $369.5 billion one year prior.
Our Broker senior broker Craig Betalli believes the results are not surprising, sharing that he expected commercial property sales would peak at the start of this rate rise cycle “as there’s less emotion involved in these transactions than, say, buying a home”.
Instead, he explained how when it comes to commercial property transactions, the emphasis is on the return on capital, “so as interest rates fell, the leverage on the rental income translated into higher prices or growth in the commercial property sector”.
While the commercial lending landscape has tightened slightly of late, the loan market is still being driven by plenty of refinancing.
Mr Betalli outlined that “there is no doubt that rates between 5 and 6 per cent are attractive to current commercial property borrowers while the banks seem to still have an appetite for lending”.
He said that sales data is still lacking, but it does appear that valuations have remained stable since the start of the rate cycle.
Moving forward, he believes the commercial property market will continue to hold up, especially given the urbanisation of numerous older industrial areas closer to central business districts, advising that “with more industrial and office space in cities such as Sydney being converted to residential, there’s also a squeeze on commercial space in the suburbs as people try to find a workspaces closer to home”.
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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