Strong demand in the commercial property market is expected to continue as mum and dad investors turn their back on residential property, according to leading real estate agency Gunning.

“An undersupply of investment opportunities and a further compacting of yields as a result of ongoing interest will see another solid year for commercial real estate investment,” Malcolm Gunning of Gunning Real Estate said.

“The falling number of properties due to turnover costs is exacerbating supply. The impact that capital gains tax has due to improved prices as well as stamp duty and other taxes and fees are a strong determinant of whether investors plan to sell or leverage their property.

“What we saw last year was real growth in industrial and commercial rentals, in many cases a range of 25 per cent improvement in face rent.

“This is good news for landlords, where we previously haven’t had any growth since the GFC. Interest in smaller investments in particular shops, strata offices, factories and retail is at an all time high because the typical mum and dad residential investor has been warned off by the banks, APRA and the press in regard to record prices and tightening finance requirements.

“Mum and dad investors are very interested in the smaller commercial, industrial and retail investment properties because of the better yields than residential, also they being encouraged by their financial planners and lenders,” Mr Gunning said.