Property Market Forecast for 2023

As we draw closer to the end of 2022, many property professionals are casting their minds forward to next year and considering what might be in store for different segments of the market.

At Jones Real Estate, we are excited about the proposition of 2023 and believe the sector will continue to rebound towards pre-pandemic levels across the developer, investor and occupier verticals.

Keep reading to learn more about our predictions for the commercial space in the new year.

Market forecasts for 2023 

This year, many asset owners have chosen to retain properties they ultimately plan to offload, and observe how the market reacts to economic factors like interest rate rises.

With most financiers predicting that the RBA’s consecutive rate hikes won’t top-out until mid-2023, this will place further upward pressure on the borrowing power of some investor groups.

We expect the cost of financing new commercial acquisitions for institutional players to continue to price them out of the market, freeing up more opportunities for the well-established private sector.

But as more asset owners decide to take their properties to market from as early as February, a bi-product of this retain-and-observe strategy in response to rate hikes could lead to yields softening, even as demand for high-quality commercial stock peaks.

As such, this could also trigger a stalemate between vendors and purchases, contributing to a potential decline in transaction volumes in the middle of the year, bookended by a strong Q4 as the market settles.

Melbourne CBD office market predictions

The city workforce will continue to return to the office in solid numbers from early-2023, and newly completed commercial stock hitting the market looms to create fierce competition for leasing opportunities, as employers jump at new spaces that will act as further drawcards to entice more staff numbers back.

In fact, we expect this flight to quality and demand for A-grade building stock within the corporate arena to heat up further due to the limited supply in sought after CBD areas.

However, while the proposition of a brand new office building will always turn heads among corporates on the move, next year could also see the beginnings of a revivalist era that would see outdated B-grade office buildings overhauled in inner-metropolitan areas.

Like the Industrial Renaissance that has unfolded across Cremorne and other creative precincts, B-grade buildings in the city surrounded by social amenities could be the next frontier of commercial stock to refurbish with state-of-the-art facilities and advanced sustainability integrations to help reduce carbon emissions – both of which are key considerations among new hire candidates.

For the owner-occupier market, we expect demand in this space to soften as interest rates grow further and overheads surge off the back of resource shortages across Australia.

Emerging opportunities for other real estate sectors

From a residential perspective, we expect developers to continue land banking in established metropolitan and suburban areas, with a view to capitalising on the shortfall of affordable housing that will continue to inflate prices well beyond 2023.

Furthermore, emerging sectors like build-to-rent, which is now a widely accepted model following an initial period of scepticism after its arrival in Australia, will be actively pursued by different local and international developers to cater for increased demand in central locations. 

With the e-commerce sector booming locally, coupled with the steady resurgence of bricks and mortar retail and supermarkets, this likely means that industrial and warehousing developers will remain active in the market too.

As such, we expect an up-tick in activity across this vertical of the market, as developers plan for properties like new headquarters built to spec and distribution centres. This should lead to several aggressive acquisition plays for land parcels with good connectivity to the city’s key arterials, which will underpin future supply levels across Greater Melbourne.

If you would like to learn more about our predictions for the Victorian commercial sector next year, or have a separate property matter you want to discuss, please reach out to us at info@jonesre.com.au.