The 2017/18 financial year was a fascinating one for Australia’s commercial property market and the economy.
As we look back at the year that was, there are a number of key learnings as well as pointers to how the coming 12 months will play out.
THE CONTINUED RISE OF ONLINE SHOPPING
REA chief economist Nerida Conisbee says that in the past 12 months Australia’s retail market has seen a seismic shift, as the way we shop continues changes forever.
Key to that change is the launch of Amazon in Australia, which has amplified our growing drift towards online shopping, and has major implications for local retail.
“The launch of Amazon is a big one. Shopping centres have gone from being virtually bulletproof to one of the least in-demand asset classes,” Conisbee says.
“A lot of that is coming down to people being worried. Retail trade has been pretty flat for quite some time. People are starting to get worried about the impact of online. We’ve also had quite a lot of store closures, such as Toys ‘R’ Us and a number of other major retailers.”
INDUSTRIAL TO THE FORE
Of course, with online retail continuing to gather steam, the requirement for space to house delivery and storage operations for those retailers is growing.
Conisbee says that the “last mile” of the supply chain – the storage and delivery of goods once they’ve arrived in their destination city – is creating a boom in certain sections of the industrial market.
“Industrial in that last ‘mile space’ is picking up,” she says.
“It’s that realisation that industrial within inner suburbs will need to be developed, or will see higher demand. We need to see more than just warehousing in the suburbs - we need this last mile capability (in the inner city).”
HOTELS THE SURPRISE PERFORMERS
Twelve months ago, many were predicting turbulent waters in the hotel market, with Airbnb tipped to eat up an increasingly large portion of Australia’s short-stay accommodation pie.
But the reality has been quite the opposite, Conisbee says, with overseas dollars talking.
“Hotel demand is red hot, and it’s all around Chinese tourism. We’ve seen huge increases in Chinese tourism,” she says.
“Things like Airbnb, there was a lot of fear that they would take demand out of hotels, but we haven’t quite seen that. Part of that has been because we haven’t seen much hotel development, so it hasn’t really led to poor conditions for hotel owners and developers.”
Moreover, Conisbee says the market should now be looking to facilitate more accommodation that caters to the wants and needs of the Asian market.
“What kind of hotels do they want? Where do they want to be? That’s going to become more and more important.”
THE CHANGING FACE OF OFFICES
The strength of the demand for Australian offices has seen even shakier markets begin to turn the corner.
And with co-working spaces becoming more prevalent and big business rethinking the way in which its employees want and need to work, offices across the board are on the up.
“Office markets, even in places that have seen very weak demand, such as Perth, are slowly recovering and turning around,” Conisbee says.
“There are a lot of changes to the way people are working. Jobs growth means more office space is required.”