Tuesday 15th April 2025
Sam Tamblyn, Contributor
It’s a sad irony for some property investors that just as interest rates are starting to come down, they can no longer hold on and are selling up.
And it’s a stark reminder for property players that more than just one or two rate cuts will be needed to reinvigorate the commercial property sector.
A lot of these vendors bought their properties or started developing them in the past three to five years, when interest rates were sitting at record lows and have held on through the commercial property sector decline, hoping for an improvement.
But the rapid rise in interest rates has been accompanied by a surge in construction costs and softer market conditions, meaning owners have to offer disproportionate incentives to secure tenants.
With a decline in many commercial property values compared to purchase prices and the erosion of investors’ equity, banks are losing patience with developers who can’t meet repayments and are pushing them to sell up.
This dynamic creates an opportunity for cashed-up buyers to pick up assets at good prices, including some below replacement costs, just as it looks like the tide is about to turn.
A good example was the recent sale of 1-3 Como Street in Melbourne’s Malvern, a newly built office building, which was listed for sale by a residential property developer after construction costs became unmanageable.
RF CorVal, a Sydney-based boutique real estate fund manager, bought the Malvern property in late 2024 for just a touch over $18 million.
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