The year 2020 began on a positive note for the commercial property domain as the economy was growing at a consistent speed, and low-interest rates were fuelling buyer confidence. The high yields from office properties brought a massive flow of capital into the sector, and investments started moving at breakneck speed. It helped in an increase in the development of new projects, and an extensive supply of office properties was expected to hit the market in the later months of the year.
However, the spread of the novel coronavirus all over the world turned things upside down. The pandemic has proven catastrophic for humanity as well as the global economy. The superpowers are scrambling to get a grip over their financial systems, and Australia is also fighting a fierce battle to stave-off the fiscal ramifications of COVID-19.
The lockdown and the social distancing norms have made a significant impact on the real estate industry, but things are not as grim as they may appear. As the restrictions are easing and the government is pumping funds into the industries, things are coming back to normal.
Thus if you are planning to invest in commercial real estate in Australia, then you should not be hesitant as the emerging trends paint a brighter picture. Let us take a look at the future of the commercial property market in 2020.
Easing Restrictions Paves The Way For Recovery
Although several countries are still grappling with the rising number of cases, Australia has been able to curb the spread with its strict regulations. The government has also urged the landlords of commercial properties to negotiate new lease terms for struggling small businesses, which have been affected by the pandemic. They have also introduced a mandatory code of conduct for commercial tenancies that will help the businesses to move forward without incurring losses.
The demand had weakened during the lockdown and may continue as many companies have become comfortable with remote working and managing the staff online. However, with the opening up of commercial spaces like restaurants, bars and shopping malls, offices are also gearing for socially-distanced working. The regional markets are gaining their momentum back with non-essential services combing back in business and providing the much-required impetus to the economy.
Strong Investment Activity In Brisbane And Other Cities
Sydney has always been a stronghold of commercial property in Australia. The highly sought-after city has showcased only a slight decline in prices and an increase in vacancy rates. However, since the supply chain has been disrupted and construction was halted for more than a month, the new supply will be getting delayed. Thus supply will not outweigh the demand in the city. Also, the low-interest rates have propelled Queensland’s commercial property market as a lot of investors are looking for yields.
The latest cuts announced by the RBA have helped in keeping the commercial real estate in Brisbane stable and unaffected by the COVID-19 pandemic. Since the stock markets seem like an unworthy investment platform in the present situation. The large institutional investors have been leveraging the record-low rates to utilise their funds in safe and risk-free property markets.
Also, the prices are not too high, like Sydney and Melbourne. Thus the Brisbane commercial property segment has managed to lure interested buyers even during the lockdown. Traditionally, the commercial real estate has been insulated from economic downturns, and the affordability of Brisbane has brought many investors to its borders.
The city is expected to record progressive trends in 2021 because of its resilient property market. The housing segment has also experienced positive growth during the lockdown, and the residential prices reached an all-time high in April 2020. Regardless of the global recession, the economy of Brisbane is expected to be worth $217 billion by 2031.
Office Properties Will Be the Least Affected
The unprecedented situation has disrupted the real estate sector, but office properties are not as badly affected by the situation as non-essential retailing. The reason behind this is that the supply-chain networks have been derailed, which have impacted the procurement of raw materials for several non-essential services.
However, a plethora of businesses are working remotely to suppress the spread of the disease, and various essential services are back in the office, such as financial and insurance companies and banking institutions. Brisbane’s office markets have been showing an upward trend in 2020 as the capital investments have increased in the city. The vacancy rates have gone down, and the demand for tenancy has been on the rise due to more companies trying to fit their offices in this growing city, which is also economically viable.
The city will not be affected by the disappearance of Chinese investors as the offshore capital had already reduced in Brisbane due to the increased land tax levied on foreign investors. The current growth is being propelled by private investors and syndicates and the business stimulus packages announced by the government to allow businesses to pay the rent and continue with their lease.
In 2019, office properties worth 1 billion were bought and sold in Queensland, and industrial investments were also above $100 million. There is demand from tenants from other states since lower rents have improved the favourability of operating in the city.
The Rise of E-Commerce Will Increase Industrial Demand
With physical distancing becoming the new normal, the e-commerce sector is going to surge. Consequently, the leasing of industrial property will witness a growth in demand as companies will need warehouses to store the stock and package it before getting it delivered. The transition of various businesses to online retailing will benefit the commercial real estate in a big way, especially in cities like Brisbane, which have affordable and spacious industrial warehouses.
All small and big enterprises are now in need of outer-city big warehouses as well as inner-city smaller storage areas for inventory management. With the supply chain coming back on track, the industrial property sector is going to be the hottest market in the domain.
The support shown by the Federal Government in reviving the economy and boosting businesses is helping several sectors to come out of the crisis. The post-COVID-19 world will be a different place. However, if you are looking for a commercial property for sale or lease in Australia, then the time is perfect for making an investment.
Sophie Barrett is an experienced real estate marketing professional with a specialisation in commercial property market. She has a Masters degree in marketing from the esteemed Melbourne Business School and has several property management certificates to her credit. Her shrewd marketing policies and business acumen have led to the most rewarding property deals in the major capital cities of Melbourne, Sydney and Perth. She is a popular name in the real estate market and has been serving the industry for almost two decades now. CommercialProperty2Sell is proud to partner with her for some astute discussions and advice on the booming sector.
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