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Australia's growing business environment is boosting demand for commercial properties across sectors like transport, healthcare, and professional services, pointing to strong market prospects.
The Australian business sector is expanding, pointing to a bright outlook for commercial property markets across the country. This analysis looks into recent data and examines its significance for various commercial real estate sectors.
New Business Formation Trends
Recent statistics show a steady increase in new business establishments in Australia, part of a long-term trend observed over the past five years. Ray White Group Head of Research, Vanessa Rader, highlights this trend: “Despite nearly 363,000 businesses ceasing operations over the last financial year, this was more than counterbalanced by 436,018 new entrants, resulting in a positive net change of more than 73,000.”
Key figures:
- 436,018 new businesses entered the market last financial year
- 363,000 businesses ceased operations in the same period
- Net increase of over 73,000 businesses
- Total business count in Australia now at 2,656,344
- 2.8% increase over the past year
- 17.2% growth over the last five years
Ms Rader emphasises the significance of this growth: “This expanding business landscape serves as a key indicator for the health of commercial property markets, signalling a likelihood of increased occupancy demand across various sectors including office, industrial, retail, and alternative uses.”
Regional Business Growth Distribution
Business expansion is not limited to one area but spread across various regions of Australia, with positive implications for commercial property markets nationwide.
As Ms Rader notes: “The growth has been widespread throughout Australia, with NSW leading in absolute numbers, adding 25,569 new businesses. Victoria followed with an increase of 18,641, while the ACT and Western Australia both demonstrated the highest percentage growth at 3.5 per cent.”
This widespread growth suggests increased demand for commercial properties across different Australian locations.
Changes in Business Size and Commercial Property Demand
The composition of business sizes in Australia is shifting, affecting different types of commercial property demand.
Ms Rader observes: “In 2023/24, non-employing businesses saw a substantial 4.9 per cent increase, adding 78,144 new entities. Simultaneously, larger businesses experienced notable growth, with a 5.7 per cent increase in companies employing 20-199 people and a 6.0 per cent rise in those with 200+ employees.”
The rise in solo operators could boost demand for smaller commercial spaces, such as shared workspaces or compact offices. The growth of larger businesses is particularly relevant for the commercial property sector, potentially driving demand for larger commercial properties in prime areas.
Sector-Specific Growth and Commercial Property Impact
Different industries are growing at varying rates, each with unique implications for commercial property demand.
Ms Rader highlights key sectors: “The transport, postal and warehousing sector led growth with an 8.5 per cent increase, likely to drive continued demand for industrial and warehousing facilities. Healthcare and social assistance followed with a 7.7 per cent rise, a segment likely to continue growing as our population ages. This trend potentially boosts requirements for specialised medical facilities.”
These sector-specific trends are shaping demand for various types of commercial properties.
Outlook for Various Commercial Property Types
The strong growth in business numbers, especially among larger companies, paints a positive picture for commercial property demand across Australia. Ms Rader summarises the outlook: “With significant increases in key sectors like transport, healthcare, and financial services, the outlook for industrial, specialised medical facilities, and office spaces is especially promising.”
This growth is likely to impact:
- Industrial Properties: Higher demand for warehouses and distribution centres
- Office Spaces: Increased interest in high-quality office spaces in central business districts
- Retail Properties: Potential demand from new businesses in consumer-facing industries
- Specialised Medical Facilities: Growing need for medical centres, clinics, and aged care facilities
- Other Commercial Properties: Possible demand for data centres, research facilities, and educational institutions
Potential Challenges
Despite the positive trend, some challenges are worth noting, including the high number of business closures and potential variations in demand across regions and property types.
As the business ecosystem continues to evolve, the commercial property landscape will adapt, creating a range of opportunities for those ready to adjust and innovate.
Further questions
What effect does the rise in solo operators have on commercial property demand?
How is the growth in the healthcare sector changing the commercial real estate landscape?
What changes in office space trends might result from the increase in large businesses?
What opportunities does the transport and warehousing sector's growth create for industrial property investors?
How does the spread of business growth across Australian states affect regional commercial property markets?
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