Commercial property in Australia - statistics & facts

Urbanization and population growth have been the key growth drivers of Australia’s commercial real estate industry. Commercial property has transformed in many ways from simply providing a place for people to work or for people to shop. Increased accessibility, shared coworking spaces, and digital connectivity are just a few of the trends that have developed within this industry in recent years. Even still, further innovation in the sector will be required to maintain steady growth, particularly with a challenging environment for many segments on the horizon. The value of commercial building activity in Australia was already forecasted to decline, even before the coronavirus pandemic hit the nation.

What are the key segments of the commercial real estate industry?

In the retail space, changing consumer habits are impacting bricks-and-mortar retailers and shopping centers. Apparel retailers held the biggest occupancy share of sub-regional shopping centers. However, more and more consumers seem to be migrating to online shopping with the Australian retail e-commerce market share forecasted to continue to increase. Along with this, current pandemic worries are also influencing how and where consumers are purchasing their goods. This will likely result in increasing vacancies in the retail sector in the short term.

Prime office real estate in Melbourne and Sydney have seen high rents and low vacancy rates over the years. With an expected increase in supply from 2020, rents may begin to stabilize. Accordingly, office yields in cities were expected to remain relatively stable in the same period. While investment in office property has been steady, interest in flexible working spaces has been uncertain, largely due to the impact of the coronavirus pandemic. These coworking spaces are usually rented out on a short-term basis, and this may be appealing to companies who do not want to be locked into a long-term contract for an office space that might not be accessible under social distancing restrictions.

The impact of the COVID-19 pandemic

Australia’s commercial real estate industry has taken a hit due to the COVID-19 outbreak in the country. The way Australians work and shop may reshape the office and bricks-and-mortar segments drastically. Many white-collar businesses have had to increase their flexibility regarding working from home arrangements. The demand for office spaces with both short-term and long-term contracts has shifted, with many business owners unwilling to commit to paying for space they will not be able to use should social distancing restriction rearise. In the retail sector, online buying has become the new normal for many in the country, with mandatory store closures turning more people towards online retail shopping.

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Commercial property in Australia

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Office vacancy rates

COVID-19 impact

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