10 commercial real estate opportunities for investors in 2023

The Real Estate Institute of Australia (REIA) identified the 10 key commercial real estate opportunities in 2023, with regional commercial properties named as the top pick for the sector’s practitioners, investors, and occupiers.

In its inaugural State of the Industry report, the national real estate body predicted that increased numbers of people moving to regional Australia will see commercial property in those areas outperform in the future.  

REIA president, Hayden Groves, said that following years of capital cities capturing investors’ attention, the demographic shift to regional locations will bolster its appeal to commercial investors.

“For commercial property investors, there is certainly opportunity to capitalise on these changing population trends and small business activity in regional areas, notwithstanding the current interest rate environment,” Mr Groves said.

According to the report, the regional markets offer comparative growth opportunities for both rents and yields as interstate migration patterns continue to evolve.

The report acknowledged that interstate migration patterns are starting to normalise post-COVID-19, with fewer people leaving Victoria and NSW compared to early in the pandemic. Data also showed that fewer people are also moving to Queensland. 

But the report highlighted that the numbers are still vastly different to pre-COVID-19 levels and this is having immediate consequences on rental prices in places like Queensland.

Aside from regional commercial properties, other key opportunities identified by REIA include:   

  • Industrial property offered with full automation and logistics solutions
  • Energy efficiency innovations
  • Future-proofed buildings
  • Energy-efficient ‘green’ buildings
  • Revived office opportunities
  • Undersupply to drive industrial rental growth
  • Future development sites and in-house automation solutions for occupiers
  • In-house automation solutions providing new value points for investors 

The report also expects Australia to continue to outperform many other developed economies.

Mr Groves said despite a mixed bag of economic headwinds, the OECD is forecasting Australia to outperform many other advanced economies, forecasting the country’s GDP to grow around 2.5 per cent.

“On the one hand, you have energy prices which will have a major impact on outgoings; but on the other hand, you have an economy performing relatively well and migration programs expanding,” he stated. 

“Energy prices are set to increase by around 56 per cent as international migration resumes for the second year at significant scale, with an anticipated 235,000 people set to call Australia home next financial year.”

According to the REIA executive, all of these changing factors offer a “unique set of opportunities and challenges” for commercial real estate sector practitioners, investors, or occupiers in 2023. 

Providing insights on how the commercial sector will fare given these conditions, the report said that while the risk premium on commercial property is tight, the sector should return to supply/demand rebalance relatively quickly as supply slows over the next few years and demand strengthens as the country moves into recovery mode. 

Occupancy has been battered in the office sector, although it is likely to be more of a structural change, rather than a permanent shift down in demand. 

The report also noted that energy-efficient buildings with great base building offerings and tenant amenities still offer good long-term value.

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