Investors set to win big: Top commercial real estate predictions for 2023

The Lion Hotel re-opens

Hotels and pubs enjoyed a particularly strong performance in the commercial sector in 2022. Picture: Tricia Watkinson

The past year has proven evolution is key for the commercial market, with many sectors continuing to shift their operations in the wake of the pandemic.

Sydney has had a difficult time luring staff back into the office on a full-time basis, with a strong population flow into Queensland and WA.

With many keen to get back to international travel, hotel assets in the CBD for foreign buyers will likely grow in popularity.

silhouette of airplane flying over Sydney CBD,Australia

As international travel continues to ramp up, demand for hotel assets in the CBD will grow in 2023.

The low vacancy rate across industrial assets in Sydney is predicted to continue into 2023, due to a limited development pipeline and growing rental pressure.

Ray White Commercial head of research Vanessa Rader said investors that capitalise on increased yields or vacant assets can reap the reward with high quality returns.

“Those buyers who see development upside in an asset or are willing to reposition or repurpose an asset to capitalise on future income and capital returns, will be rewarded,” Ms Radar said.
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The growing population across Sydney has driven up occupancy levels and increased demand for vacant assets. Picture: NCA NewsWire / Nikki Short

“Growing population has had a positive impact on occupancy levels and returns for some asset classes due to increased demand. Savvy investors will follow these population movements to aid in keeping vacancies low and income return more favourable.”

Rapidly changing conditions over the course of 2022 have slowed the market, with many commercial operators changing their strategy to keep up with their competitors.

Both domestic and global investors have become increasingly cautious, with rising debt markets identified as the biggest driver for the year.

According to Cushman & Wakefield managing director Simon Fenn, investor activity should increase across Australia.

Child care centres will continue to perform strongly in 2023.

“There are several exciting opportunities emerging in alternative markets. One being childcare, while is currently entering a strong growth phase supported by strengthening demographics and increased federal funding. These assets are characterised by longer leases of 10-20 years with multiple 10 or 20 year options offering a measure of stability over other asset types,” Mr Fenn said.

“Although higher rates are likely to have an impact on capital values, this impact should be at least somewhat offset by income growth, particularly in the industrial market where there is little to no vacant space or for assets of the highest quality.”


High-quality office stock could provide greater levels into 2023 and 2024. Picture: NCA NewsWire / Nikki Short

Attracting leasing incentives and the availability of high-quality office stock could provide greater levels into 2023 and 2024.

As tenants become more comfortable with improving business conditions, the market should continue to improve for the better quality stock.

Cushman & Wakefield’s Giuseppe Ruberto said deals would continue to flow for the Sydney metro office markets into 2023.

“As we enter a period of global uncertainty, we expect leasing transactions to slow in the first half of next year before improving in the second half. Tenants will continue to transact as they readjust their real estate footprint to accommodate greater hybrid working and we expect the ongoing trend of flight to quality will be the main driving force,” he said.


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