Property Counterpoints
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What insights does Scott O'Neill share about commercial property investing?
It's The Real Estate Podcast brought to you by Ray White, the largest real estate and property group in Australasia. And welcome to another episode of The Real Estate Podcast. We're talking to Scott O'Neill from Rethink Investing. Welcome to The Real Estate Podcast, Scott. Thank you for having me. Mate, it's great to have you on. And you're dealing in the residential investment property space and also the commercial property space. And when it comes to the commercial sector, particularly in investment, a lot of mum and dad investors especially just can't get their heads around sort of putting money into that sector, preferring to stay with the residential that they've come to know, love and sort of trust over the years.
And in many ways, commercial is that step into the unknown for these people. But at the same time, including commercial into someone's portfolio shouldn't really be seen as that scary Darth Vader proposition, should it?
No, but look, you're quite right. The big thing I find that holds a lot of people back is just the lack of knowledge. Compare that to residential. Everyone... has experience with a residential property, whether you've lived in one or rented one or bought one. It's a barbecue topic. There's a lot more media attention on residential and commercial sort of look that like forgotten cousin in the background that quietly does its thing. And I think that's where the opportunity lays. Like there is a lot higher cashflow on offer. It's not as scary as you think. Once you actually get your head around know what drives businesses into certain types of commercial properties even just understanding the three main asset classes which is office industrial and retail because even a novice investor will realize there might be different levels of risk in say office first industrial and understanding what the economy is doing at that point of time is is where there can be actually a lot more opportunity so they're the main reasons i see people
I guess, hold back from commercial, but that is changing. We're seeing there's a lot more education out there on commercial and just the high prices and the low yields that you're going to see in residential after all this growth they've had. It's going to push more investors to commercial just by default because they need better income. And that trend has rapidly been happening over the last few years.
I think you actually raise a really good point there. The barbecue topic, everybody around the barbecue talking about residential. And then you might have one person that says, well, have you guys considered commercial? And then somebody would say, oh, no, no, you don't want to get into that office space. Somebody could sort of throw up a negativity when it comes to office.
Why do many investors hesitate to enter the commercial property market?
So of those three, how do you rate them in the commercial space?
Look, I never like to generalize, but you do have to generalize sometimes to start with. And look, we all know COVID, for example, has pushed more people out of the office. So if you're going to pick the weakest of the three right now, it would have to be office. But then again, you can't generalize. Like office might include medical-based properties, the suburban office spaces where out in the suburbs, there might be just a small commercial building with some dentists and some mortgage brokers or real estate agencies, there's a lot of very good offers out there. But would you go buy up in a tower in the middle of COVID? Probably not. On the other side, you've got industrial. Industrial is right now from coast to coast across Australia, probably the strongest subsector of the commercial market because all these businesses that have been forced to close their doors with COVID, they buy and store and sell
a lot of their products online now. So this e-commerce boom actually contributes to tighter leasing markets for the actual industrial spaces. And on top of that, build costs are going through the roof. So to build more of this stuff, it costs more. So there's actually quite rapid capital growth happening right now to the tune of over 15% per annum in some markets for industrial.
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Chapters
4 chapters
1
What insights does Scott O'Neill share about commercial property investing?
0:02–2:48
2
Why do many investors hesitate to enter the commercial property market?
2:48–8:29
3
What are the main asset classes in commercial real estate?
8:29–11:21
4
How has COVID-19 affected the commercial property landscape?
11:21–12:39
Speakers
2 identifiedMore from Aussie Real Estate Podcast
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