The post-COVID-19 era has brought about a surge in new businesses, which is expected to have a positive impact on the commercial real estate market. According to Vanessa Rader, the head of research at Ray White, there were 406,365 new businesses registered through the 2022/23 financial year, bringing the total number of Australian businesses to 2,589,873. While New South Wales had the highest number of businesses, the growth rate was only 0.9%. On the other hand, Queensland experienced the most growth with a 2.3% increase.
Queensland’s success can be attributed to its growing population, which has created a demand for businesses that cater to the needs of the evolving demographic. The healthcare and social assistance sectors saw the highest growth, with a 6.1% increase. This is in line with the strong demand for healthcare assets such as hospitals, medical centers, and integrated facilities. The industrial sector has also performed well, driven by growth in transport, postal, and warehousing activities.
Investors are particularly attracted to the healthcare and industrial sectors due to their potential for long-term capital gains and stable income. The demand for these assets is expected to remain high, ensuring income stability for the foreseeable future. In contrast, the office and retail sectors face challenges. The rise of remote work and e-commerce has impacted office and retail spaces, leading to high vacancies and depressed returns. While the increase in new businesses in professional sectors like finance, insurance, and real estate is promising, the future of the office market is still uncertain.
Despite recent interest rate hikes and a slowdown in investment activity, the healthcare and industrial sectors continue to be attractive options for investors. These sectors have shown promising returns over the last year, with healthcare assets growing by 3.5% and industrial assets growing by 6.9%. Meanwhile, retail returns remain steady at 2.8%, and office asset returns have fallen by 2.2%.
Overall, the surge in new businesses is bringing optimism to the commercial real estate market, but there are regional variations in growth. The healthcare and industrial sectors are attracting investors with their stability and growth potential, while the office and retail sectors face challenges due to remote work and e-commerce impact.
Definitions:
– Commercial real estate: Property used for business purposes, such as office buildings, retail stores, and industrial facilities.
– Post-COVID-19 era: Refers to the period after the COVID-19 pandemic and the changes and challenges that have emerged as a result.
– Surge: A sudden increase or growth.
– Registered businesses: Companies that have been officially recognized and recorded by the relevant authorities.
– Growth rate: The percentage change in the number of businesses over a specific period.
– Demographic: The characteristics of a population, such as age, gender, and income levels.
– Healthcare assets: Properties related to the healthcare industry, including hospitals, medical centers, and clinics.
– Industrial sector: The sector of the economy that includes manufacturing, transportation, and warehousing activities.
– Long-term capital gain: Increase in the value of an investment over an extended period.
– Income stability: The ability to generate a consistent and predictable income.
– Office market: The segment of the commercial real estate market that focuses on office spaces.
– Remote work: Work that is done outside of the traditional office environment, often utilizing technology to communicate and collaborate.
– E-commerce: Buying and selling goods and services online.
– Retail assets: Properties used for retail purposes, such as shops and shopping centers.
– Interest rate hikes: An increase in the cost of borrowing money from financial institutions.
– Investment activity: The buying and selling of assets for the purpose of generating a return.
– Vacancies: Unoccupied spaces.
– Depressed returns: Lower than expected or desired investment returns.
Sources:
– Ray White
– ABS (Australian Bureau of Statistics)
– MSCI (Morgan Stanley Capital International)