Raine and Horne Commercial Newcastle co-principal Steven Dick said owner-occupiers and investors are combining to drive demand for commercial property in Newcastle priced below $2 million.
"Office and retail vacancy rates in the smaller size ranges have shrunken dramatically in Newcastle, which is a very strong sign that we’re operating in a healthy market," said Mr Dick.
"Investor demand is unprecedented, with tenanted properties being snapped up almost as soon as they hit the market," he said.
Around 50 per cent of properties up to $2 million are selling to investors prior to auction, he said.
"Many investors have recovered their positions over the last eight years since the GFC, and they want to protect this position by diversifying," said Mr Dick.
"As a result, they are hedging their bets by investing some of their hard won capital into Newcastle’s commercial real estate markets."
The Newcastle property market has also been buoyed by infrastructure injections such as the University of Newcastle’s $95 million education precinct and the Doma Group’s $36 million commercial, residential and retail complex.
"There are three or four other major developments in the pipeline that will create more commercial space and feed into the student accommodation market, as well as provide options for first home buyers and downsizers who are moving in increasing numbers to the CBD," said Mr Dick.