The top three commercial assets classes of 2022

Industrial has been the best-performing commercial asset class during 2022, followed by medical and childcare, according to one of Australia’s leading commercial property analysts.

Ray White Commercial head of research Vanessa Rader said demand for industrial property has grown hand-in-hand with the growth in logistics, distribution and transport.

Supply, though, has not kept pace with demand. As a result, vacancy rates across the country are below 1% and rents have been surging.

"Furthermore, with little supply on the horizon and many markets hampered by tight available developable land, the future for land values appears favourable," she said.

"While yields are unlikely to sustain their lows given the pure cost of finance, the longer term prospect of high occupancy and increased returns will see good results for industrial owners."

Ms Rader forecast industrial assets located on major transport nodes or with development potential would be likely to deliver handsome returns in years to come.

Medical

Ms Rader said medical assets had another good year in 2022, continuing the momentum that started building well before the pandemic.

Part of the reason is that the medical sector no longer caters to just the very young and old, she said. Now, it serves people in between, through sports medicine, preventative care, cosmetic services, holistic care and alternative treatments.

"With increased demand has come improvements in leasing rates and, with limited purpose-built facilities, the readaptation of other assets such as retail to cater for the growing demand,” she said.

“Often secured by long leases with fixed increases, these assets are kept to a high standard given their medical use, which is attractive to the investor looking for a secure, growing income stream.” 

Childcare

Ms Rader said childcare, like medical, did well again in 2022 after becoming an increasingly attractive asset class over the past few years.

Increases in government subsidies are expected to lead to higher demand for childcare and stronger returns for investors

“Again, an asset class with high occupancy, assets which have the ability to be redeveloped or extended will benefit from an uplift in return, with those well located in metropolitan areas likely to hold their value over regional assets,” she said.

“Remembering commercial property is a long term asset, the underlying land value for many childcare assets is another positive for this asset class."

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