There is no doubt that trading conditions are going to be difficult, but fortunately the commercial property market has a number of advantages.  According to Wall & Smith, these difficult times force changes in emphasis from certain investment sectors.
 
1. With prime at 14%, the cost of borrowing, lack of confidence in the long term economy, concern about unacceptable crime levels and difficulty in getting finance from the banks means that investors take the safe route and simply don't invest. Potential owner occupiers take the same view. The recent decline in prime is not enough to jump start this market; borrowing rates will have to drop significantly (3%-4%) before we see investors returning.
 
2. The letting market gets busier - it is cheaper to rent than it is to buy, renting is not such a long term commitment and lease periods tend to be short as lessees hedge their bets.
 
3. As business declines, lessees look to sub-letting premises, reducing existing space and moving to smaller, cheaper premises.
 
4. Developments, actual and in the planning stage, come to a stop as developers look to buying existing buildings with potential.
 
5. Landlords start offering rent-free periods, dramatically reduce rentals, increase installation inputs and offer broker incentives to get buildings tenanted. Onerous new terms by bank managers means fewer developments, could be good for existing landlords, but in certain suburbs where there is an oversupply of premises, landlords may still be forced to drop rentals in order to fill buildings.
 
6. Activity in the "small, entrepreneurial business" sector increases with enquiries for smaller premises, eg industrial retail and offices, in the 50m² to 150m² range.
 
7. Sellers affected by high interest rates and defaulting tenants may have to drop selling prices.
 
8. Landlords don't escalate rent on renewal and in some cases reduce rent to keep tenants, and will look to the income benefits of signage on their buildings.