What are the key segments of the commercial real estate industry?Prime office real estate in Melbourne and Sydney has seen high rents and low vacancy rates over the years. The yield of prime office CBD real estate was highest in Western Australia and lowest in New South Wales. 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. 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 fully utilized.
In the retail space, changing consumer habits are impacting brick-and-mortar retailers and shopping centers. In 2017, 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 forecast to continue to increase. Along with this, shopping habits and behaviors following the coronavirus pandemic will also influence how and where consumers will purchase their goods. This may result in increasing vacancies in the retail sector in the short term.
The industrial sector looks likely to experience growth in the coming years. In a recent survey, property professionals expected the industrial capital values to increase in the next year. Growth in this segment is closely related to the increasing demand for warehouse space from online retailers and e-commerce platforms. Mega warehouses, automated facilities, and logistics hubs are needed to expand Australia’s e-commerce fulfillment capabilities. Online retail giant Amazon along with grocery chains Coles and Woolworths are just a few of the names that are looking to occupy more industrial space. DHL and Australia Post are also increasing their postal and delivery facility occupancy.