How will population growth affect commercial property
by JONES REAL ESTATE on June 07, 2023
There has been a lot of chatter recently about how our rising population will affect the residential housing market, but how will it influence commercial property?
By 2032, Melbourne will take over Sydney for the mantle of the most populated city in Australia and count six-million residents as its own. This is a couple of hundred thousand more than our NSW rivals.
From a national-perspective, there are just over 25 million people living in Australia, which is not much in comparison to other countries globally, however what is interesting is that we are heads and shoulders above everyone on the global population growth charts.
According to mapping from our contemporaries at CBRE, the Australian population is expected to grow by 13.8 per cent between 2021 – 2030. This is three per cent higher than New Zealand in second place (10.8 per cent), and over four per cent more than heavyweights including Canada (9.4 per cent), India (7.9 per cent) and the United States (six per cent).
While this influx of migrants will continue putting upward pressure on the housing market as supply struggles to keep pace with demand, we expect there to be several positive knock-on effects for commercial real estate in Victoria.
What type of commercial property will benefit the most?
We expect the logistics and retail verticals to be the biggest beneficiaries from the country’s broader population growth, however there will likely be some positive change for workplaces too.
According to the same CBRE research, Australia could require over 4.45 million square metres of warehousing and logistics real estate over the next three years to stay in front of online retail demand from new residents.
This means properties that sit atop favourable commercial and industrial-zoned land parcels will be in high demand over the next decade, with extra square metreage becoming more important among brands that are on-shoring manufacturing, warehousing and fulfillment following the pandemic.
As the volume of people in our cities climbs, so too will the need to provide important every day and specialised products in an easily-accessible manner.
We expect this to create a strong uplift among large-format and standalone retail property performance, in both established and emerging residential areas – such as Melbourne’s booming northern and south-eastern growth corridors.
Why is population growth important among investors?
In a market that has experienced its share of challenges in the past 24-months, population growth will act as a tailwind against negative influences stemming off increased financing rates, yields and values softening, as well as the slowdown of the economy more broadly.
In a recent article published by the AFR, the Property Council of Australia’s CEO Mike Zorbas said the influx of new residents across the nation will “underpin our attractiveness as a global investment destination”.
Similarly to the current market, we anticipate solid transaction activity to be generated by the private sector, however as more capital becomes available among global institutions, this should bring more players into the local marketplace and drive valuation growth.
If you would like to learn more about our forecasts for the Victorian and national commercial property markets, or discuss a separate commercial sales or leasing matter, please reach out to us at: firstname.lastname@example.org