Covid may have rocked parts of the commercial property industry to their foundation, but this disruption has also created fresh opportunity according to the Real Estate Institute of Australia.

Commercial property in regional areas will be among those sectors to benefit the most from the pandemic-driven upheaval and demographic shifts said REIA President Hayden Groves. A large proportion of regional areas had seen notable population growth and higher levels of business activity which in turn would present investors with some of the best conditions in years through 2023, he said.

As for the industry as a whole, Mr Groves pointed to the most recent Organisation for Economic Co-operation and Development (OECD) forecast for Australia as a beacon of hope amid a “mixed bag of economic headwinds”, the OECD forecasting Australia to outperform any other advanced economies with GDP growing up to 2.5%.

“Energy prices are set to increase by around 56% as international migration resumes of the second year at significant scale with an anticipated 235,000 people set to call Australia home next financial year,” Mr Groves said. “All of these changing factors offer a unique set of opportunities and challenges in the run in to 2023 for the commercial real estate sector be it practitioners, investors or occupiers.”

REIA Top 10

The REIA identified 10 opportunities for the commercial sector falling within the areas of automation and technology, supply, sustainability, changing migration patterns and property development as part of its inaugural State of the Industry Report: Australian Commercial Real Estate. The report was created in response to feedback from the commercial real estate sector that signalled stakeholders were “hungry for insights, information, in-person engagement and more tailored tools in the toolbox to position their businesses for success” Mr Groves said. It is the first in a series of research reports that will be developed to support Australian commercial real estate practitioners and co-launched with member local Real Estate Institutes in the next few months.

The 10 areas identified in the report as presenting key opportunities for the commercial property sector are:

  1. Regional commercial investment
  2. Industrial property offered with full automation and logistics solutions
  3. Energy efficiency innovations
  4. Future-proofed buildings
  5. Energy efficient ‘green’ buildings
  6. Revived office opportunities
  7. Undersupply to drive industrial rental growth
  8. Future development sites
  9. In-house automation solutions for occupiers

10. In-house automation solutions providing new value points for investors.

Mr Groves said the supply/demand situation facing commercial property would gradually rebalance this year, and the tight risk premium on properties ease, as the country continued to move through recovery mode.

New horizons

Low office sector occupancy was more of a structural change than a permanent shift Mr Groves said. According to Panthera Group CEO Chakyl Camal, 2023 will be the year that owners of commercial assets in city centres have “an important opportunity” to reposition their assets to “suit a lifestyle work environment in CBD locations”.

Other opportunities in 2023 would be presented by the areas of healthcare, agriculture and real estate credit – the provision on non-bank real estate finance to the industry due to tighter lending criteria among the big four banks - said Jason Huljich, joint CEO of listed investment manager Centuria Capital Group. Strong industrial rental growth would also continue throughout the coming year as demand remained high amid limited supply.

In the retail sector, local shopping malls and centres will continue morphing before our eyes according to Ray White senior analyst Vanessa Rayder. Retail spaces will increasingly be filled by the likes of medical services, entertainment options, outlets selling an ever-growing array of tempting foodstuffs, and even childcare companies and co-working organisations due to increasing demand for such services in urban areas.

As for the hospitality sector, 2023 looks to be one of the better if more expensive times for investors to peruse the market. Australia’s large domestic tourism base had underpinned the sector’s recovery, and the industry was projected to hit pre-pandemic levels this year said Colliers’ head of hotel Karen Wales.

Trudy Crooks, managing director of leading hospitality asset agency ResortBrokers, said 2023 was filled with promise for the sector ,starting with Tourism Research Australia forecasts for visitor night figures to rise by 20% and eventually reach pre-covid levels. “Overseas travel is more expensive for Australian and therefore a less attractive holiday option – all of which is terrific news for our domestic accommodation sector,” Ms Crooks said.