16 July 2019   

10 min read
With the uncertainty around the Australian economy, the industrial and office markets remain supported by high levels of investment in public infrastructure, solid growth from trading partners and strong rates of population growth. National Director of Research at Cushman and Wakefield, Tony Crabb says that while business confidence is mixed from industry to industry, the industrial and office markets remain upbeat.

“The outlook for the industrial market around the country is buoyant as demand from logistic and last mile delivery continue to drive the market."

“Office markets in Melbourne and Sydney are effectively full while demand continues to squeeze into any and all available space. Tenants will look forward to “breathing out” and expanding into new space as it is delivered from 2020 onwards. Office markets in other states continue to deal with an overhang of excess space.

“A strong demand coupled with a limited supply of stock and a lack of available serviced land is driving increasing land prices ensuring future rental growth,” he says.

Driving demand in the sector, according to Tony, are new market entrants and existing transport/logistics/retail players requiring an agile supply chain network.

“Last year, Australia Post reported a record three million parcel movements on 17 December followed by a record-equalling 2.7 million parcel movements on 24 December. It has taken nearly 20 years for online shopping to move into the mainstream and it certainly appears to be there now.

“As more people move to online shopping the demand for logistics and last mile delivery, especially with ongoing population growth, will continue to define the industrial sector for the next decade,” he said.

In the workplace sector, growing demand for office space is driving down vacancy rates in CBDs across Australia. With tenant demand already outstripping supply, strong jobs growth and a low unemployment rate will continue this trend.

In today’s market most businesses are making workplace decisions based around attracting and retaining the best staff and having access to prospective employees. Flexible office space will continue to impact leasing patterns across national office markets. Businesses seeking workplace solutions that boost productivity, provide environmental benefits and add to employee wellbeing will be a big driver. The recently launched M_Park will be workplace in the heart of Macquarie Park designed to inspire, connect and thrive. Learn more about this $500 million project here.

Last year, general business expansion accounted for around half of all new office leases signed, which Tony believes is reflective of good business conditions. Coworking or flexible office space providers accounted for the other half of demand.

“Coworking is a relatively new phenomenon and is related to serviced offices. Flexible working conditions are being sought by businesses as a way of facilitating changing business conditions in a cost effective manner. It is also reflective of more start-up businesses and sole practitioners in the economy as digital work increases.

Tony believes the future outlook is promising.

In Sydney, the completion of new transport projects including the North West Metro and the South West metro will open up new office space and opportunities for investment, and there may be an increasing diversity in demand from sectors such as tech and pharmaceuticals.  

“Demand to occupy the built environment seems assured for years to come as our population continues to grow. Our burgeoning superannuation scheme is providing abundant and competitively priced capital to property and business ensuring investment demand remains strong.

“Changing work (digital) and work practices (agile/flex) point towards more mixed use and “village” built form in the future. Co-location (CBDs) and transforming existing properties (shopping malls) to create more villages is an exciting opportunity for the property industry, he said.

However, there will be challenges ahead too.

“As the Australian population grows and our capital cities take the majority of our population, density, intensity of land use, congestion, planning and affordability (equality of access) will all create opportunities and challenges for the property industry.

“It would be remiss not to mention a changing climate and while sustainability is a working brief in the property industry, extreme weather events will continue to pose risks everywhere.”

“The outlook for the industrial market around the country is buoyant as demand from logistic and last mile delivery continue to drive the market."

“Office markets in Melbourne and Sydney are effectively full while demand continues to squeeze into any and all available space. Tenants will look forward to “breathing out” and expanding into new space as it is delivered from 2020 onwards. Office markets in other states continue to deal with an overhang of excess space.

“A strong demand coupled with a limited supply of stock and a lack of available serviced land is driving increasing land prices ensuring future rental growth,” he says.

Driving demand in the sector, according to Tony, are new market entrants and existing transport/logistics/retail players requiring an agile supply chain network.

“Last year, Australia Post reported a record three million parcel movements on 17 December followed by a record-equalling 2.7 million parcel movements on 24 December. It has taken nearly 20 years for online shopping to move into the mainstream and it certainly appears to be there now.

“As more people move to online shopping the demand for logistics and last mile delivery, especially with ongoing population growth, will continue to define the industrial sector for the next decade,” he said.

In the workplace sector, growing demand for office space is driving down vacancy rates in CBDs across Australia. With tenant demand already outstripping supply, strong jobs growth and a low unemployment rate will continue this trend.

In today’s market most businesses are making workplace decisions based around attracting and retaining the best staff and having access to prospective employees. Flexible office space will continue to impact leasing patterns across national office markets. Businesses seeking workplace solutions that boost productivity, provide environmental benefits and add to employee wellbeing will be a big driver. The recently launched M_Park will be workplace in the heart of Macquarie Park designed to inspire, connect and thrive. Learn more about this $500 million project here.

Last year, general business expansion accounted for around half of all new office leases signed, which Tony believes is reflective of good business conditions. Coworking or flexible office space providers accounted for the other half of demand.

“Coworking is a relatively new phenomenon and is related to serviced offices. Flexible working conditions are being sought by businesses as a way of facilitating changing business conditions in a cost effective manner. It is also reflective of more start-up businesses and sole practitioners in the economy as digital work increases.

Tony believes the future outlook is promising.

In Sydney, the completion of new transport projects including the North West Metro and the South West metro will open up new office space and opportunities for investment, and there may be an increasing diversity in demand from sectors such as tech and pharmaceuticals.  

“Demand to occupy the built environment seems assured for years to come as our population continues to grow. Our burgeoning superannuation scheme is providing abundant and competitively priced capital to property and business ensuring investment demand remains strong.

“Changing work (digital) and work practices (agile/flex) point towards more mixed use and “village” built form in the future. Co-location (CBDs) and transforming existing properties (shopping malls) to create more villages is an exciting opportunity for the property industry, he said.

However, there will be challenges ahead too.

“As the Australian population grows and our capital cities take the majority of our population, density, intensity of land use, congestion, planning and affordability (equality of access) will all create opportunities and challenges for the property industry.

“It would be remiss not to mention a changing climate and while sustainability is a working brief in the property industry, extreme weather events will continue to pose risks everywhere.”

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