Will Australian commercial property stay strong through 2021 and beyond?
Updated: May 13, 2021
What does the future looking like for those who are investing in Australian commercial property?
Generally, commercial property in Australia has held up really well and gained strength early in 2021. At the time of writing, the Australian commercial real estate sector is valued at $1.2 trillion dollars and could increase beyond this year.
The key to this trend has been a high level of confidence post COVID-19, which we’ve seen from late 2020 up until now. Both consumer confidence and business confidence are rising as we start to return to pre-COVID normality and the economy continues to strengthen.
And with the consistently low COVID cases, reliable management of any mini outbreaks and vaccine developments, we can expect this confidence to grow. Add to that the record low borrowing costs and ‘Fear Of Missing Out’ influencing property and the markets generally.
But if last year taught us anything, it’s that our situation can change at the drop of a hat, and there are still many question marks linked to the pandemic.
Where’s the long-term damage?
Potentially the biggest damage we’ve seen is the massive hit taken by bricks and mortar retail. While many retail sectors were already lagging pre-COVID, the virus has undoubtedly accelerated the transition to ecommerce. Today, a high percentage of the population has adapted to the convenience and comfort of online shopping.
Although, it isn’t all doom and gloom. The eased restrictions and increasing travel freedoms mean retail stores across the country are becoming more accessible and generating increased foot traffic.
What can we expect for office spaces?
The office market presents one of the biggest unknowns. On the one hand, the workforce in Australia is back on the rise as businesses return to normal trading. More job adverts are also re-appearing, indicating a strong confidence in the recovery of office spaces over the upcoming years.
However, the permanent shift in the way we now work cannot be denied. COVID-19 has brought the benefits of working from home, such as greater productivity, efficiency, flexibility and safety. So, many organisations are permanently structuring their business models to accommodate remote working, which may place less demand on office space. There is a risk that investors and landlords could see further declines in occupancy as tenants re-think their leases or seek out smaller premises.
But the office is far from a thing of the past. It may just play a different role for businesses. The key here is staying flexible in how your office space can be adapted and changed to suit tenants’ evolving needs. If you’re investing in the office market, seek out flexible office spaces to suit a smaller in-house workforce, mixed use spaces or top quality locations where you’ll attract strong tenants and demand will be high.
Industrial and logistics-based commercial real estate is still going from strength to strength and won’t slow down anytime soon as ecommerce continues to become entrenched in the way we live.
Retailers of all kinds are rapidly making the transition to ecommerce and digital platforms to match the demand from consumers, who have adapted to the comfort and convenience of shopping online. By example, major supermarket chains have drastically increased their investment into delivery and click-and-collect services and, as more industries follow, we see the ever-increasing need for warehousing, storage and logistics facilities.
Finally, the evolving vaccine rollouts and need for other pharmaceuticals will also increase the growth and development of suitable industrial spaces.
Should you invest in Australian commercial property?
Put simply, the Australian commercial property market in general will continue to be a reliable option for investors. The key factor for 2021 and beyond will be strategy. Having the right plan in place, and working closely with a trusted property adviser, will be more essential than ever before to ensure investment success, even as circumstances change and evolve.
Where to seek help
It starts with the right strategy. talk to an experienced property adviser about what you need to do to get set up for success.
Contact us to discuss your needs. No obligations.
Managing Director, Broadway Property
Director, Broadway Property