Hobart commercial market is selectively strong: Raine & Horne

Hobart's commercial market is witnessing a number of hotel developments, including a 296-room project by Singapore-based Fragrance Group.

Describing the commercial market in the Tasmanian city as “selectively robust”, Raine & Horne Commercial co-principal Leslie Simpson says there is "strong demand for some categories of commercial property and limited interest for other assets, which is probably similar to other cities around Australia”. 

Self-managed super funds are driving exceptional demand for passive investment stock, adds Simpson.

“These investors are happy to acquire assets that reflect yields below historic benchmarks for the Greater Hobart area,” he said. “Many will accept these returns based on the justification that they are still better than bank account earnings. However, this purchaser type is highly risk averse, with interest quickly diminishing if not supported by a strong lease covenant”.

According to Leslie, the more traditional investors in the Hobart market are still seeking higher, more traditional yields, often leaving a gap between vendor expectations and market interest for secondary investment stock with short term leases.

Retail, industrial and visitor accommodation properties are attracting significantly more interest than other forms of commercial real estate, according to Leslie.

“Tasmania’s impressive recent growth in both domestic and international visitor numbers has seen very strong market interest in visitor accommodation, particularly from Asian interests.

“We currently have three new hotels under construction in the Hobart CBD, and there are another four hotels either proposed or with permits subject to appeal."