With 2024 around the corner, many real estate publications and governing bodies have begun forecasting market trends for the year ahead. In Australia, 2023 has been a story of increasing inflation rates, but despite the financial hardship, many Perth markets have remained resilient. One such market is commercial property in WA, which we explore below, before sharing our commercial property outlook for 2024.
Perth has been a haven for commercial real estate investment in 2023 with many investors seeking more affordable assets in WA. With the rising uncertainty surrounding interest rates, well-priced commercial properties in the eastern states have been near impossible to find.
As expected, Perth’s industrial sector performed well yet again, with persistent interest for small-medium warehouses and other facilities. The office market in Perth has also remained resilient in 2023 despite the popular ‘work-from-home’ trends. Unlike most other regions, Perth’s office market continues to experience a high demand and better return than other property assets.
The commercial real estate sector in Australia has made a strong comeback after the challenges of the pandemic. Experts predict the next two years will continue to usher growth and opportunity in the sector, with declining interest rates and cooling inflation expected in late 2024 to create favourable conditions. The Reserve Bank of Australia forecasts inflation dropping to around 3.25% in late 2024 and further to 2.3% in 2025.
With the economy forecast to improve next year and interest rates expected to fall late next year, 2024 may bring another big year for commercial real estate in Perth. Overseas and local investors are returning with capital to acquire premium assets in lucrative markets in WA that offer solid yields at reasonable prices. In comparison to the eastern states, Perth has remained a popular area for commercial real estate, and that’s set to continue.
Beyond the stable, diversified economy, population growth fuels demand. The national population is projected to hit 30 million before 2033. With more businesses and people, commercial real estate needs will climb, lifting the sector up.
Below we explore some hot topics in the current real estate market and consider the viability of specific commercial property types.
We couldn’t share a commercial property outlook for 2024 without mentioning the inflation rate. The July-September quarter in 2023 saw the consumer price index (CPI) rise 1.2%, which has now caused yet another interest rate rise before the end of the year.
While this isn’t the news we want to hear, there is a positive outlook for 2024. As per the Royal Bank of Australia (RBA), we can be hopeful that inflation declines late next year (2024), with the inflation rate forecasted to be within 2-3 per cent in late 2025.
According to Statista Market Insights, the growth of eCommerce in Australia has been stagnant between 2021 and 2023, but 2024 is set for growth. In fact, the Australian market is projected to be worth $42.65 billion (USD) by the end of 2024, up from $37.65 billion in 2023. By 2027, these estimates expect the eCommerce market to reach $54.68 billion (USD).
What does this mean for the commercial property market in Perth? Online shopping companies rely on large storage facilities and vast networks of distribution centres. In Perth, multi-purpose warehouses and well-placed logistics centres will be in demand as a result.
While Australia has always been a popular destination for migrants, the recent deterioration in China’s property market may spur a greater influx of Chinese migrants and investors. This article by the AFR shares data from a Juwai IQI report which estimates 70,000 new migrants from China are likely to arrive on our shores in the next 2 years.
Economists are divided on the overarching impact this will have on the Australian market, but given Perth is one of the most affordable cities to live, we can expect plenty of investment in commercial property too.
As mentioned earlier, industrial properties like warehousing in Perth continue to be popular with investors and business owners. The vacancy rate within the industrial property market in Australia has reached record lows post-pandemic, increasing property values. While industrial property assets across the country have increased in value, and rents have sky-rocketed, Perth is among the most-affordable cities for this property type.
Countering the above statement, Perth’s industrial real estate has displayed a 0.2% increase in available space in the last year, though this is still the second lowest nationally.
Unlike industrial properties, commercial office real estate experienced a downfall after the pandemic. However, 2023 and upcoming years are seeing employees returning to the office at least for a few days a week. The preference for regular in-person interactions mean business owners will be in the market for versatile office spaces.
Check out some office trends in Perth below.
While the rest of the country is recording a rebound in CBD office occupancy, Perth’s sprawled design is, as always, promoting easy-to-access commercial areas outside the CBD. This CBRE research revealed Perth’s CBD office occupancy is around 54%, the lowest in the country.
Many business owners in Perth are instead, flocking to areas like the southeastern commercial areas of Welshpool, Kewdale, and Victoria Park. The location and accessibility of these Perth areas are top priorities for commercial real estate buyers and tenants. The public exposure and robust public transit connections are also undeniable benefits for many. Not to mention, convenient road access enables swift transport of goods and faster distribution for eCommerce companies.
Many tenants seek out centrally located offices, warehouses, and retail spaces accessible by various transportation modes. The ability to commute, move products, and distribute goods efficiently makes location a prime consideration.
Key areas to consider for commercial property investment in 2024 include Ascot, Belmont, Burswood, and the aforementioned Kewdale, Victoria Park, and Welshpool.
2024 is set to be a big year for commercial real estate nationwide. We hope this commercial property outlook for Perth helps you plan for the new year and sets your sights on new investment opportunities in the west.
Should you like any more guidance in the market or expert advice on suitable properties for sale in Perth’s southeast, get in touch with us today.
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