Owner-occupiers drive commercial property market surge
More businesses are looking to establish themselves in properties they own rather than rent, driving an uptick in commercial property sales.
Colliers South Australia executive Jack Dascombe says a growing number of owner-occupiers are seeking commercial spaces across metropolitan Adelaide, particularly within the CBD.
He said the shift was being driven by various factors, including the rising cost of debt and the strategic advantages of property ownership.
“Despite the higher cost of debt, many businesses find that building equity in an asset they own is more financially advantageous than paying market rent, which has led to a noticeable uptick in businesses looking to establish themselves in their own premises,” Dascombe said.
Colliers data shows vacant possession (VP) sales – sales of non-tenanted premises to new owners – were concentrated in the $1 million to $5 million price range.
The number of VP sales was consistent with 2023 levels, Colliers said, but their proportion of the total number of deals has increased and now represents 65 per cent of the total.
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Colliers said this trend was even more pronounced in the Adelaide CBD, where VP sales account for 72 per cent of the total number of sales in 2024 – an 18 per cent increase on 2023.
Property investors were turning to higher-yielding leased investments rather than VP sales, Dascombe said, due to the rising cash rate.
However, owner-occupiers prefer the characteristics and positioning of properties over financial returns.
“An example of this trend is the recent sale of 17 The Parade, Norwood,” Dascombe said.
“The property represented an opportunity for owner occupiers and investors to secure a charming character office along Norwood’s tightly held Parade retail precinct.
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“Our price guide for enquiring groups was $1,700,000 based on comparable market data. After a competitive campaign with five offers all from owner-occupiers, the asset ultimately sold for $2,037,500.”
The Colliers executive said the South Australian government’s compulsory acquisition of properties along South Road was also contributing to this trend.
“Businesses displaced by these acquisitions have been seeking new locations across metropolitan Adelaide, often within tight timeframes, driving up demand for vacant possession opportunities,” he said.
Excluding sales of unimproved land, in the 12 months to October 2024 64 per cent of Colliers’ SA transactions provided the opportunity for vacant possession at settlement – compared to 53.5 per cent in the previous 12 months.
Investment Services associate director, South Australia, Rhys Newman said the current interest rate environment presented “a unique opportunity for vendors to divest at record levels, generating healthy returns from cash deposits”.
“Properties offering immediate occupancy or short lease tails are particularly desirable to owner-occupiers,” Newman said.
“The increased activity from owner-occupiers has created a competitive market for vacant possession properties, especially those with quality improvements in prime Adelaide locations.
“The enquiries from owner-occupiers have only grown and we anticipate this trend to carry on into the next year.”
