THERE IS A BELIEF among many experts that a surge in the stock market typically precedes a recovery in the commercial property market by about six months. And the start of this year saw equity markets gaining some momentum.
Bank of America’s most recent survey of fund managers for 2023 indicates that this momentum is expected to remain strong.
The majority of professional share investors are optimistic about a “Goldilocks” scenario, where they predict a soft landing for the global economy. They also anticipate lower inflation and bond rates in 2024, suggesting the potential rate cuts is not far off.
However, it is essential to maintain a realistic perspective.
The stock market has not fully acknowledged the excesses of the past decade, and there has been no significant recession to reset the business cycle. Additionally, the full impact of recent rate hikes has not yet been felt in the economy.
Nonetheless, there is a general consensus that the share market rally will continue.
The commercial property market has certainly faced its own challenges during 2023.
A slow return of staff to the office after the COVID-19 pandemic, along with rate hikes from the Reserve Bank, plus an unwanted distraction of the referendum … have all created a “perfect storm” for the industry.
As such, investors tend to remain cautious and do nothing when they’re unsure.
Where to from here?
Most people are eager to put the challenges of the past year behind them and hope for a sense of normality in 2024.
The Office market, in particular, has been impacted by remote work arrangements. However, there is a growing trend for employers to tie career advancement to in-person office attendance.
This shift is expected to gain momentum in 2024, benefiting landlords and those looking to sell.
Industrial property experienced a surge in demand last year due to limited supply. Both the leasing and sales markets were strong, and this trend is likely to continue in 2024, gradually levelling out after that.
Retailing, on the other hand, has yet to fully recover from the Global financial crisis. Some tenants have been in a constant “sales mode” since then.
However, there is strong investor demand for big-ticket retail outlets; and well-established food operators are also attracting buyers.
Bottom Line: The first half of 2024 is expected to see commercial investors slowly emerge from an unexpected hibernation over the past two years. The second half of the year should provide more activity, as they try to make up for lost time.
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