A REBOUND in the residential property market this year is expected to flow on to the commercial sector.

Agents believe the residential sector will bounce back first followed by a revival in commercial property.

Scott Green of LJH Commercial Cairns said historically low interest rates should energise the commercial section, drive economic growth and stimulate the market, with prices predicted to rise by 5 per cent nationally.

"The commercial property market indicators are positive, consistent with an improving investment environment and business and consumer confidence," he said.

Mr Green said timing was on the side of commercial investors.

"We've seen the property market pass through the bottom of the cycle and now moving into a period of stabilisation, which makes it a prime time for investors to get set for the next phase, the upturn," he said.

"While the residential property market is likely to lead the upswing, the commercial property market will follow, giving you a greater window of opportunity to make a savvy purchase.

"The majority of new investors have a stronger grasp of the residential property market than on the commercial sector but we are looking at solid economic conditions for long-term commercial property investment, especially where low interest rates make yields an attractive proposition for investors."

Mr Green said he had two commercial properties of note, including a Sheridan St shopping complex with 10 shops for $1.6 million and a modern 350sq m warehouse at Portsmith was $1 million.

CBRE Cairns managing director Danny Betros said the commercial sector would be better than last year but would still be "flat".

He said State Government cutbacks were still hurting with a lot of government spaces vacant, both in their own properties as well as leased sites.

Mr Betros said residential would lead the property sector, particularly with the low vacancy rates in houses and units
There was pent-up demand for good quality units in the CBD or on the fringe.

Colliers International Cairns managing director Stacey Quaid said the end of last year showed a strengthening of interest and activity with some notable properties being sold.

"Based on the participation we saw last year and the settling of news around the world economies, we expect the commercial market in 2013 will continue to build on the gains of 2012," he said.

"We believe the inner city will see some reasonable activity in 2013 as the focus returns to the traditionally prime areas.
"While we still see vacancies through the CBD, there is activity to suggest that this will change, which will attract back investor confidence and the outlook for future capital gains."

Mr Quaid said the return of strength in the sugar sector, "rumblings in the development sector and the positive drive of the tourism sector" would see some activity in industrial property.

Greg Wood of Knight Frank Cairns said the market had stabilised and there was a lack of properties in all sectors.

"Vacancy rates are very low and rentals have been flat which indicates an excellent situation for growth," Mr Wood said.

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